SEC Proposes New Rules for US Treasury Market Clearinghouses

September 14, 2022

The Securities and Exchange Commission (SEC) recently proposed rule changes to enhance risk management practices for central counterparties in the U.S. Treasury market and facilitate additional clearing of U.S. Treasury securities transactions.

The proposed rule changes would update the membership standards required of covered clearing agencies for the U.S. Treasury market with respect to a member’s clearance and settlement of specified secondary market transactions. Additional proposed rule changes are designed to reduce the risks faced by a clearing agency and incentivize and facilitate additional central clearing in the U.S. Treasury market.

Specifically, the proposal would require that clearing agencies in the U.S. Treasury market adopt policies and procedures designed to require their members to submit for clearing certain specified secondary market transactions. These transactions would include:

  • All repurchase and reverse repurchase agreements collateralized by U.S. Treasury securities entered into by a member of the clearing agency
  • All purchase and sale transactions entered into by a member of the clearing agency that is an interdealer broker
  • All purchase and sale transactions entered into between a clearing agency member and either a registered broker-dealer, a government securities broker, a government securities dealer, a hedge fund or a particular type of leveraged account

With respect to customer margin, the proposal would permit broker-dealers to include margin required and on deposit at a clearing agency in the U.S. Treasury market as a debit in the customer reserve formula, subject to certain conditions. In addition, the proposal would require clearing agencies in this market to collect and calculate margin for house and customer transactions separately. Finally, the proposal would require policies and procedures designed to ensure that the clearing agency has appropriate means to facilitate access to clearing, including for indirect participants.

The proposing release will be published on SEC.gov and in the Federal Register, and the public comment period will remain open for 60 days following publication in the Federal Register.