FICC Proposes Enhancements to Correlation Calculation for Bond Haircut Models

The Fixed Income Clearing Corporation ("FICC") proposed amendments to its risk management methodology to enhance the correlation calculation for bond haircut models applied to Government Securities Division ("GSD") Members.

In its proposal, FICC said the purpose of the amendments is to mitigate risk exposure from bond positions by allowing the use of alternate vendor data when designated vendor data is unavailable, thereby avoiding the need to set correlations to zero for certain short-term maturity buckets.

The proposal also includes a technical amendment to the QRM Methodology Document to correct a specific section reference to ensure accuracy in the risk management documentation.

The proposed rule change is subject to approval by the SEC within 45 days of publication in the Federal Register.