FICC CIL: Eliminating money funds’ cleared margin and clearing broker balance sheet

FICC’s Collateral In Lieu (CIL) eliminates both cleared margin and potentially bank balance sheet impact on clearing brokers from money fund sides of FICC-cleared Treasury GC repos. This can remove the incremental funding and capital costs of the Treasury clearing mandate on money funds and their clearing brokers.

Key Takeaways

• No cleared margin: A money fund lending cash via Treasury reverse repo cleared via Collateral in Lieu (CIL) grants a lien to FICC on the securities collateral it received on the trade, obviating the need for cleared margin (the so-called “double margining”).
• No settlement guarantee and bank balance sheet impact: The lien also means the sponsoring member (SM) does not need to guarantee money fund trade settlement performance to FICC. This may enable the SM to report no balance sheet impact of CIL trades.
• Strong adoption incentives: The benefits for money funds and SMs strongly encourage their adoption of CIL ahead of the mid-2027 SEC Treasury clearing mandate go-live.
• Market impact: CIL may increase competition from smaller banks in repo market making and client clearing.

The ISLA UST Briefing

I attended the ISLA Americas U.S. Treasury Clearing Briefing on 14 April 2026 at BNY offices in downtown Manhattan. From the panels and some repo “friends and family” catchups, I got a useful update on collective progress towards the Treasury clearing mandate.

FICC’s CIL was a prominent topic. The consensus was that CIL is expected to be widely adopted by money funds and that ICE and CME intend to offer similar capabilities.

CIL will therefore reshape how Treasury repo clearing operates at scale for cash lenders which is a key aspect of repo market structure.

Non-CIL points discussed included the addition of done-away to several FICC access methods, the adoption of FICC agency clearing by hedge funds, and the status of new Treasury CCPs from CME and ICE. I will cover these in future blogs.

Background

If you are curious on those topics, my previous blogs on SEC Treasury clearing mandate scope and FICC clearing methods should help. One of the methods covered in the second blog was CCIT (Centrally Cleared Institutional Triparty service) which targeted money funds, but we know now that SEC never approved it to go live.

The inaugural CIL trade was cleared at FICC after the trade was executed by BNY Securities Finance and Federated Hermes on 23 December 2025. Shortly before the December launch, CIL got SEC approval for its 3 September 2025 CIL proposal.

CIL is documented in two FICC documents: Sponsored GC Expansion and Sponsored GC Expansion FAQ. As well as being the basis for this blog, those documents should help the uninitiated on any repo and clearing jargon below which might escape you.

In this blog, I use the following shorthand for ease of reading:

• “Money funds” abbreviates “money market funds and other pure cash lenders”. These are firms which only lend cash in the UST repo market.
• “Hedge funds” abbreviates “leveraged investors including hedge funds, pension funds, REITs and traditional asset managers”. All of these can use repo to leverage investor capital if a specific fund’s constitution allows, but hedge funds are the largest and most famous group.
• “BNY” abbreviates “tri-party repo platform of a Sponsored GC Clearing Agent Bank”. This is used throughout the FICC documentation to admit the possible entry of other cleared UST triparty agents than BNY.

A lien “in lieu” of cleared margin and settlement guarantee

CIL is an expansion of FICC’s sponsored clearing service combined with some changes in BNY’s Global Collateral Platform.

The crucial difference from the pre-existing sponsored GC Treasury repo clearing method is that CIL allows money funds to clear UST GC reverse repos without incurring cleared margin¹ (know by FICC as “clearing fund deposits”) or a settlement guarantee. The cleared margin on sponsored GC repo trades with hedge funds is known as “double margining” because the done-with dealer already pays the two percent haircut on the trade.

“In lieu” of cleared margin, the CIL funds lender (CILFL, typically a money fund) grants a lien to FICC on the collateral received by the CILFL on the reverse repo. In a CILFL default, FICC may liquidate the collateral to cover losses. The lien is also “in lieu” of the settlement guarantee the SM would provide under regular sponsored clearing.

The lack of a settlement guarantee means the CIL SM has no credit default exposure to the CILFL. Banks providing SM service thus hope to incur no impact on either their leveraged balance sheet or their counterparty credit risk weighted assets (ccRWA) – so long as their credit, legal and accounting policy groups determine as such. If you need further background on financial resource impacts, these other blogs may help: bank financial impacts of UST clearing, buyside ways to reduce UST cleared margin.

The CIL SM still has the same liquidity requirements as regular sponsored clearing (loss allocations and capped contingent liquidity facility (CCLF)). The costs of these impacts are not publicly quantified but seem minor being temporary funding only provided to FICC during the default of a clearing client.

Separate CIL accounts

To enable FICC to perform risk and default management of CIL trades separately from other trades, CIL trades are cleared via separate SM and BNY accounts. The CILFL sets up a CIL-specific triparty account at BNY. The SM assigns the CILFL to a CIL-specific omnibus clearing account within the SM’s sponsored clearing arrangement with FICC. Both BNY and the CIL SMs are responsible for limiting those accounts to CIL trades.

Though not direct FICC members, CILFLs are legally onboarded at FICC including the assignment of an alphanumeric code unique to the CILFL which is tagged on CIL trades. FICC uses the tags to identify each CILFL’s trades within each SM CIL omnibus account, which can therefore be used for more than one CILFL, thus simplifying client onboarding.

Restrictions on CIL trade economics

CIL trades must have a mandatory haircut of two percent (which is also a floor for any future mandatory rate changes by FICC). The CILFL thus receives UST collateral covering 102% of the cash amount lent on each trade. In this way, FICC has made a rule of current market practice and avoids the possible trade-level negotiation of a smaller haircut between a money fund and a dealer.

CIL trades are subject to a $30 billion maximum size² and a two-year (or 735-day) maximum term.

CIL operational rules

The CILFL side of a trade must be submitted to FICC by the SM via “RTTM Web” at FICC. This includes done-away: that is the done-away SM submits the trade to FICC after the trade has been given up to it by the CILFL. Direct trade submission to FICC by the CILFL, as usually happens under regular sponsored GC clearing, is not permitted.

The SM’s responsibility for trade submission is the only difference in operational processing from regular sponsored GC clearing. All other trade submission to and matching at BNY, all trade settlement, and any other detailed BNY and FICC processes follow the same procedures and deadlines as regular sponsored GC repo trades.

Limited CIL SM responsibilities

If it has occurred to you that a CIL SM has quite limited responsibilities, you are right. BNY directly manages settlement between CILFL and FICC, while FICC manages novation, CILFL counterparty risk and default close-out. If we assume for simplicity that there is zero balance sheet impact of the CILFL side of the trade, this leaves the CIL SM responsible for:

• CILFL trade submission to and matching at FICC.
• Provision of CIL sponsored GC omnibus accounts to CILFLs, including limiting those accounts to CIL trades.
• Funding FICC SM liquidity requirements in a CILFL default (loss allocations and/or CCFL requirements).

A step forward in financial efficiency

Like CIL, CCIT included the grant of a collateral lien by the money fund to FICC in place of cleared margin, but the money fund was to be a direct FICC clearing member with no SM involved. By giving the CIL SM, the limited responsibilities noted above, FICC has effectively shifted to the SM some day-to-day CILFL facing processing without imposing a heavy financial burden on the SM. Most importantly unlike CCIT, CIL is SEC-approved and live.

My blog FICC margin growth highlighted estimates from DTCC’s 2024 Clearing Participant Survey. These indicated that indirect Treasury clearing (a.k.a. client Treasury repo clearing) would grow activity by 5.1x and cleared margin by 6.5x to $66 billion from mid-2024 until Treasury clearing mandate go-live. No doubt CIL will materially reduce that $66 billion at industry level, since CIL-adopting money funds will avoid cleared margin, whether paid for by the money fund or the SM. Only another industry survey will indicate the size of the reduction.

The lack of any SM counterparty exposure to the CILFL makes CIL what I call a “pure agency client clearing” method. FICC’s other UST sponsored clearing methods do incur SM counterparty exposure to the client because of the settlement guarantee. We may not see public estimates of the ccRWA savings. My sense is this is a material reduction of bank ccRWA usage and therefore a material improvement in the returns on capital of banks’ repo trading and/or clearing business lines.

Safe to say both money funds and their SMs will be keen to transition to CIL. I also wonder whether smaller banks will be encouraged to compete harder as repo market makers or clearing brokers.

End note

That’s it for today. Flip back to the top to recap the takeaways.

Look out for future blogs on other points from the ISLA UST briefing.

Note:

1. At the top of page 23 of Sponsored GC Expansion, a narrow scenario is defined which would mean the CILFL does incur cleared margin. The rules stipulate a $1 million minimum amount of cleared margin which should be a strong incentive to prevent the scenario from happening.
2. This assumes that FICC has already followed through on its intention to increase the maximum size to $30 billion from $9.999 billion as documented on page 5 of Sponsored GC Expansion FAQ.