SEC Central Clearing Rule Changes: Determining the right Treasury market clearing access model for your firm

By Ami Vora, Vice President, Fixed Income Product Management, Mark Pekala, Vice President, Fixed Income Product Management, and Sandipram Ganguly, Senior Director, Professional Services

Introduction

U.S. Treasury market participants have had more than seven months to digest the Securities and Exchange Commission’s (SEC) December 2023 rule adoption announcement that will require most Treasury cash and repo trades to be cleared through a Covered Clearing Agency (CCA). 

With only about 30% of the current Treasury repo market¹ — and less than 15% of the Treasury cash market — currently cleared,²  the move to mandatory central clearing for the majority of trading activity represents a significant shift for both buy- and sell-side market participants.

The Fixed Income Clearing Corporation (FICC), which currently is the only CCA to clear Treasury trades, sits at the nexus of this transformation.

Since the beginning of the year, the FICC has reviewed its clearing service with the stated goal of facilitating access for all eligible secondary market transactions.

There’s evidence that the market is already warming to clearing Treasury transactions. The FICC reported as of June 2024, its Treasury clearing business stood at more than $7.5 trillion in average daily volume.³  In addition, the FICC has stated it anticipates clearing will add about $4 trillion a day in average daily volume to that current number.⁴

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References

⁽¹⁾https://www.dtcc.com/news/2024/march/12/dtccs-ficc-treasury-clearing-volumes-grow-31-percent

⁽²⁾https://www.sec.gov/newsroom/speeches-statements/gensler-statement-treasury-clearing-121323#_ftn4

⁽³⁾ https://www.dtcc.com/-/media/WhitePapers/Treasury-Clearing-Mandate.pdfPDF file, 0 KB

⁽⁴⁾ https://www.dtcc.com/news/2024/march/12/dtccs-ficc-treasury-clearing-volumes-grow-31-percent