Financial Guarantees

First American Security (RE), Company registered with the Insurance Services Department of the New York Authorities Section 13-B of the Insurance License Act No. MT124009, offers acceptable Customers, Financials Guarantees for OTC clearing membership in Interest Rate Swaps (IRS). Membership in IRS is in a distinct risk pool and financial guarantees are separate from each other. OTC FX membership is part of the Futures, Options and Zero-Coupon risk pool.
 
OTC Clearing Member Requirements:
The general requirements of clearing membership are stated in Chapter 9 of the rulebook for each Exchange. Additional requirements can be found in the following chapters of the CME Rulebook:
OTC clearing members that will clear OTC derivatives for customers must be registered with the United States Commodity Futures Trading Commission (CFTC) as a Futures Commission Merchant (FCM).
OTC clearing members that are incorporated/domiciled in non-U.S. jurisdictions must be subject to a legal and insolvency regime acceptable to the Clearing House.
 
Guarantee Fund Requirements:
All OTC clearing members must deposit with the clearing house a guaranty fund deposit for their obligations to the Clearing House. For IRS membership, the guaranty is the greater of $15,000,000 or the clearing member’s proportionate share of the two largest IRS Clearing Member’s losses as outlined in CME Rule 8G07.
 
Capital Requirements:
Capital requirements for OTC clearing membership can differ depending on whether the member is a bank or non-bank. Capital requirements for non-Banks are specific to the member’s Exchange membership privileges and, if applicable, any OTC products that it will clear. For non-Bank clearing members, capital is defined as Adjusted Net Capital as computed in accordance with CFTC Regulation 1.17. For Bank clearing members, capital is defined as Tier I Capital, as defined in accordance with regulations applicable to the bank clearing member. For an OTC Clearing Member, the Exchange capital requirement is the greater of the CFTC or SEC capital requirement or:
 
For a non-Bank clearing member:
$5,000,000 if it will clear only exchange-traded futures/options
$50,000,000 if a clearing member will clear any OTC derivative product, including, but not limited to IRS
20% of aggregate performance bond requirement for all customer and house accounts containing CME-cleared IRS positions
 
For a Bank clearing member:
$5,000,000,000 if it will clear exchange-traded futures/options
$50,000,000 if it will clear only OTC derivative products, including, but not limited to IRS
20% of aggregate performance bond requirement for all proprietary and affiliate accounts containing CME-cleared IRS positions
 
Settlement Banks:
All OTC clearing members must maintain bank and securities safekeeping accounts at one or more Clearing House banks for purposes of posting cash and securities to meet mark-to-market variation, performance bond (i.e. margin), and guarantee fund requirements.
 
Periodic Financial Reporting Requirements:
FCM clearing members are subject to daily, bi-monthly, monthly, and annual financial statement reporting requirements. OTC clearing members must submit monthly CFTC Form 1-FRs or SEC FOCUS reports (if a U.S. registered broker dealer) to the CME Group Financial and Regulatory Surveillance Department through the WinJammer system, an electronic financial statement filing system. Such monthly reporting includes the submission of an unaudited monthly report as of the clearing member’s fiscal year-end.