SEC's Treasuries Clearing Initiative to be Headed by Commissioner Uyeda
SEC Provides Guidance for Smooth Transition to Central Clearing of U.S. Treasury Securities
In a move aimed at ensuring a seamless transition, the Securities and Exchange Commission (SEC) has released updated guidance and rule amendments for the mandatory central clearing of U.S. Treasury securities. Commissioner Mark T. Uyeda, who will lead the agency's efforts in this regard, emphasised the global significance of the U.S. Treasury market and the need for a well-managed transition.
The compliance dates for cash and repo clearing of U.S. Treasury securities have been set for December 31, 2026, and June 30, 2027, respectively. The SEC's goal is to implement policies that enhance the Treasury market's functioning, and the staff is dedicated to assisting broker-dealers and other market participants in the path to central clearing.
To facilitate a smoother transition, the SEC has extended the compliance dates by 12 months, as announced on February 25, 2025. This extension allows additional time for engagement on compliance, operational, and interpretive questions. Despite the extension, firms face a tight timeline with key deadlines in late 2025 through mid-2027 for implementing policies and submitting eligible transactions to central clearing.
The clearing mandate applies to virtually all cash and repo transactions involving direct participants of the Clearing Corporation of America (CCA), including repos, reverse repos, interdealer broker trades, and trades involving broker-dealers or government securities brokers.
The SEC’s Division of Trading and Markets has also released FAQs addressing broker-dealers’ questions on the application of customer reserve formulas related to cleared U.S. Treasury securities, including the use of credits, prefunding margin requirements with cash or securities, handling excess margin collateral, mark-to-market payments, and issues related to Proprietary Account of Broker-Dealer (PAB) holders.
Related rule amendments by Fixed Income Clearing Corporation (FICC) involve revisions to rules governing suspension, waivers, or extensions in emergency circumstances, streamlining operational flexibility under the clearing framework.
Commissioner Uyeda, Chairman Paul S. Atkins, and the staff of the SEC are committed to engaging with market participants, central banks, and fellow regulators to ensure a correct transition of clearing U.S. Treasury securities. They plan to provide further guidance in areas where the transition could benefit from additional clarification, addressing concerns raised by the industry.
In summary, the SEC’s Division of Trading and Markets and Commissioner Uyeda have provided updated guidance and rule amendments aimed at ensuring a well-managed transition to mandatory central clearing of U.S. Treasury securities, with detailed FAQs to assist broker-dealers in regulatory compliance, and extended deadlines to support operational readiness. The efforts related to central clearing of U.S. Treasuries are ongoing, with the ultimate goal of maintaining the stability and efficiency of the U.S. Treasury market for the benefit of the country and the world.
[1] SEC Division of Trading and Markets: [Link to SEC announcement] [3] SEC Division of Trading and Markets: [Link to FAQs on customer protection rule amendments] [5] Fixed Income Clearing Corporation: [Link to related rule amendments]
The SEC's rule amendments and updated guidance aim to ensure a smooth transition of central clearing for U.S. Treasury securities within the financial industry. Commissioner Uyeda and the staff of the SEC plan to engage with market participants and regulators to address industry concerns during this transition.
