The SEC has increased its support for broker-dealers and other market participants navigating the transition to mandatory central clearing of U.S. Treasury securities. The Commission launched a dedicated “one-stop” webpage providing up-to-date information, staff statements, regulatory materials and answers to frequently asked questions. (SEC)
Background to the Treasury Clearing Rule
In December 2023, the SEC adopted a suite of rule changes requiring registered clearing agencies to implement policies and procedures to centrally clear eligible secondary-market transactions in U.S. Treasury securities — including certain cash trades and repo/reverse repo agreements. (SEC) These rules aim to strengthen risk-management practices, reduce settlement exposures and increase the resilience of the U.S. Treasury market. (Federal Reserve Bank of New York)
Extended Compliance Dates to Ensure Orderly Implementation
Recognising the operational, legal and technological complexity of the transition, the SEC extended key implementation deadlines. For example, compliance for cash market trades now falls by December 31, 2026, and for repo transactions by June 30, 2027. (SEC)
What the New Webpage Provides for Market Participants
- A central portal to access staff guidance, regulatory filings and oversight materials. (SEC)
- Updated Frequently Asked Questions (FAQs) from the Division of Trading & Markets, including clarifications on mixed-CUSIP triparty repo transactions. (SEC)
- Access to applications filed by entities seeking registration as clearing agencies for Treasury securities, and proposed rule changes by self-regulatory organisations (SROs). (SEC)
- Direct contact channels for questions: market participants can email the SEC’s Division of Trading & Markets at tradingandmarkets@sec.gov or call 202-551-5777. (SEC)
Key Statements from the SEC
Commissioner Mark T. Uyeda, assigned to lead the Treasury-clearing initiative, emphasised that “changes to the U.S. Treasury market must be done carefully and deliberatively to avoid disruption.” He noted active engagement between SEC staff, other federal regulators and market participants. (SEC)
Implications for Broker-Dealers and Clearing Agencies
Market participants should regard this change as a major restructuring of the U.S. Treasury market. Eligible transactions will increasingly move into central clearing, requiring:
- New membership or access arrangements to qualifying clearing agencies;
- Enhancements in operational infrastructure, trade-flow automation and settlement connectivity;
- Margining, risk-management and segregation practices aligned with central-clearing models.
Industry estimates indicate that daily volumes subject to new clearing could balloon by several trillions of dollars once fully implemented. (Federal Reserve Bank of New York)
Action Items for Stakeholders
- Review the SEC’s new webpage periodically for the latest guidance and updates.
- Assess whether your entity’s transactions fall within the scope of “eligible secondary market transactions” (cash trades, repo, reverse-repo) under the rule. (Arnold & Porter)
- Engage with your clearing-agency counterparties and custodians to determine your access model (direct participant, sponsored access, indirect access) and associated timeline.
- Upgrade systems and documentation (legal, settlement, margin, collateral flows) to support central-clearing workflows.
- Monitor further guidance from the SEC and industry bodies on scoping, exemptions and clearing-model innovations.
For more information, contact the securities lawyers at Sallah Astarita & Cox, at 212-509-6544 or visit Securities Lawyer
