Clifford Chance

Update on the U.S. Treasury Security Clearing Mandate and FICC Rule Proposals

July 2, 2024

On December 13, 2023, the U.S. Securities and Exchange Commission adopted rule changes that will require direct participants of covered clearing agencies to clear repurchase and reverse repurchase agreements and certain cash market transactions involving U.S. treasury securities, subject to enumerated exclusions (the "Treasury Clearing Rules"). The Treasury Clearing Rules are designed to facilitate the implementation of central clearing of U.S. treasury securities, including by requiring CCAs to adopt policies and procedures requiring their direct participants, or members, to submit for clearing "eligible secondary market transactions".   

Separately, in March of this year, as directed under the Treasury Clearing Rules, the Fixed Income Clearing Corporation, the only existing CCA for U.S. Treasury securities, submitted to the SEC proposed changes to its rulebook (the "FICC Proposed Rules") designed to effectuate the central clearing mandate. Among other things, the FICC Proposed Rules seek to expand the avenues by which market participants can submit U.S. Treasury securities to FICC for clearing and to bolster protections provided to market participants who are customers of FICC netting members for the purposes of entering into transactions involving U.S. Treasury securities.  

Taken together, the Treasury Clearing Rules and FICC Proposed Rules represent a significant change to the operation and market structure of the world's largest and arguably most important securities market and will take considerable time and resources to implement.

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