FICC’s risk management of the arrangement occurs primarily at the Sponsoring Member level.
- All applications for Sponsoring Membership are decided on by FICC Management and the FICC Board of Directors.
- The Sponsoring Member is responsible to FICC for posting all of the Clearing Fund associated with the activity of the Sponsoring Member Omnibus Account, which is calculated twice daily on a gross basis (i.e., for Clearing Fund calculation purposes, each Sponsored Member’s trading activity is VaR margined separately and the sum of those total VaR charges is collected and held by FICC separate from the Clearing Fund posted by the Sponsoring Member for its proprietary activity).
- While the Sponsored Members are principally liable to FICC for their securities and funds-only settlement obligations, the Sponsoring Member is required to provide a guaranty to FICC with respect to all obligations of its Sponsored Members, so that if a Sponsored Member does not satisfy any of its obligations to FICC, FICC can invoke the Sponsoring Member’s guaranty.
- Liquidity needs created by activity in the Sponsoring Member Omnibus Account will be considered when calculating the Sponsoring Member’s Capped Contingent Liquidity Facility (CCLF) requirement.