Statement Summary
The SEC’s Treasury Clearing Rule aims to enhance the U.S. Treasury market’s resilience and transparency by mandating the clearing of certain secondary market transactions. Historically, only a portion of Treasury transactions were centrally cleared, creating an inefficient market structure. As of now, centrally cleared transaction volumes have surged dramatically, thanks to proactive industry adjustments and enhanced services from clearing agencies. The SEC has taken steps to address implementation challenges, offering guidance and considering exemptive relief requests from market participants. The rule’s compliance deadlines are set for December 31, 2026, for cash transactions, and June 30, 2027, for repo transactions, with an emphasis on continuous market participant engagement to ensure a smooth transition.
Original Statement
Thank you, Brian [Smith of the U.S. Department of the Treasury], for the introduction. I appreciate the opportunity to update you on the ongoing implementation of the Securities and Exchange Commission’s Treasury clearing requirements. The Commission’s Treasury Clearing Rule was intended to strengthen the resilience, transparency, and operational integrity of this market. Its success will depend on careful, thoughtful, and measured implementation by regulators, clearing agencies, and market participants. Getting the implementation right is essential to preserve the trust that domestic and international participants place in the U.S. Treasury market as a whole.
Prior to the adoption of the Treasury Clearing Rule, only a portion of U.S. Treasury transactions were centrally cleared. Dealer-to-dealer trading was cleared through a single clearing agency, the Fixed Income Clearing Corporation (“FICC”). Most dealer-to-customer and principal trading activity cleared bilaterally, which came without the benefits of netting or centralized risk management. Only about a quarter of Treasury cash trades and less than half of Treasury repo transactions were centrally cleared, leaving much of the market operating through fragmented, firm-specific processes.
The contrast today is striking. Even ahead of the Rule’s compliance dates, centrally cleared Treasury activity has dramatically increased. According to FICC, daily cleared Treasury volumes are now approximately 165% higher than before the Commission’s proposal.
Progress and Implementation
Market participants have made significant progress in preparing for mandatory Treasury clearing. Industry groups have published market-standard documentation for both the done-with and done-away clearing models to support firms’ negotiation with and onboarding of clients. Market participants have been redesigning their trading workflows, upgrading systems, and conducting extensive end-to-end testing to prepare for expanded clearing requirements. This progress in implementation is substantial.
The Commission has been working consistently to address the issues and concerns that have arisen in the course of implementing the Treasury Clearing Rule. Today, I will focus on the Commission’s progress, the challenges that remain to be addressed, and the role that market participants continue to play in supporting a smooth transition to full central clearing.
In the last 12 months, the Commission has approved enhanced margin-efficiency offerings at FICC, including collateral-in-lieu arrangements and expansion of the FICC agent clearing service to tri-party repos, as well as cross-margining at the customer level with Treasury futures. These developments have expanded clearing access to more market participants by creating additional pathways for firms that previously had no direct or practical means to centrally clear Treasury activity—such as buy-side institutions, smaller broker-dealers, and principal trading firms.
At the same time, these enhancements have strengthened the experience of firms that were already centrally clearing by improving margin efficiency, increasing optionality in how they manage risk across cash, repo, and futures positions, and reducing the operational frictions associated with daily settlement and collateral movements.
In the past year, the Commission also approved the registration of two additional clearing agencies, CME Securities Clearing, Inc. (“CMESC”) and ICE Clear Credit LLC (“ICC”), giving market participants more choice in how they meet their clearing obligations. The additional clearing providers create potential alternatives for firms with different business models, including institutions that may benefit from varied membership structures, workflows, or support services. However, market forces will determine the extent to which such alternatives are economically beneficial.
Guidance and Exemptive Relief
Another area of focus for the Commission and its staff has been providing appropriate guidance on the implementation of the Treasury Clearing Rule, and in some cases tailored relief from related regulatory obligations. Like most new rules, it is not surprising that there are a range of interpretive questions—some technical, some operational—that surface only after the compliance, operations, and information technology professionals start their implementation work. SEC staff have worked to address these questions quickly and directly, so firms can build processes, update documentation, and adjust systems accordingly.
One major focus area has involved Exchange Act Rule 15c3-3, the customer protection rule, that governs broker-dealer reserve calculations. Firms have raised questions about the application of this rule to cleared Treasury activity. Last year, SEC staff issued targeted guidance, clarifying that it is permissible for broker-dealers to temporarily pre-fund, on behalf of their customers, segregated margin with U.S. dollars in addition to Treasury securities.
More recently, the Commission noticed a request for exemptive relief submitted by SIFMA to permit firms to include a debit in their reserve calculations for margin required and on deposit at a qualified clearing agency for customer positions in cleared Treasury securities where margin is calculated and delivered on a net/omnibus basis, rather than on a gross, customer-by-customer basis. In its request, SIFMA stated that an exemption is needed to address operational strains on firms that could impair their ability to facilitate customer access to the cleared U.S. Treasury markets. The Commission is considering this request and taking feedback from the public.
Beyond Rule 15c3-3, SEC staff have provided guidance on several operational scenarios that firms believed were critical to their implementation planning. FAQs have been issued outlining expectations for how market participants should consider a clearing agency outage or a failed-trade scenario—situations that, while infrequent, can carry significant operational implications. Other FAQs have clarified what information is available to help firms identify a government securities dealer, which is important, in certain circumstances, to determine which transactions fall within the clearing requirement.
Future Considerations
At this point in time, there are two significant questions about the scope of the Treasury Clearing Rule that remain outstanding. This past spring, two trade organizations (the Institute of International Bankers, or “IIB,” and SIFMA) submitted separate requests for exemptive relief. The IIB request concerns transactions executed entirely outside the United States between non-U.S. parties. Market participants and foreign regulators have raised concerns about the operational complexity, legal uncertainty, and time-zone limitations associated with applying the Rule’s trade submission requirement to trades occurring wholly overseas. The SIFMA request seeks to expand the set of affiliates eligible to rely on the inter-affiliate exception and to introduce a tailored activity-based threshold for certain non-U.S. affiliate transactions.
Both requests raise questions about applying the Rule to transactions involving non-U.S. entities and non-U.S. activity, and both challenge the operational feasibility of mandatory trade submission for global institutions. Because resolving one request necessarily affects the other, the Commission reopened the comment periods to solicit further public input on how to reconcile them in a harmonized framework that addresses concerns about competitiveness, operational feasibility, and legal certainty, while adhering to the core objectives of the Rule.
One potential path forward could be an exception from the clearing mandate with a firm-specific cap on non-cleared, non-U.S. repo activity. By limiting such transactions to a defined portion of a firm’s overall Treasury volume, a cap could address concerns raised by both requests while maintaining the core integrity of the Rule. Commenters also asked the Commission to consider an alternative market-wide cap, based on average daily repo volume in the Treasury market, which could be useful for firms with a smaller and less domestic-focused Treasury repo business.
While the idea of a market-wide threshold is conceptually appealing, it is still not clear whether any firms would use such a threshold or how such a cap could be calculated or administered in practice, including what data sources and inputs should be used to size the repo market and the number of participants in that market.
If you are a market participant that thinks a market-wide threshold would be useful to you, it would be helpful to hear from you, including specific feedback on how you would utilize such relief (and at what volume), how you would suggest calculating such a threshold, and how such a threshold can be calibrated or updated over time.
As we continue evaluating these requests, one point remains clear: public engagement is essential. Input from market participants has shaped our policy considerations. When commenters identify issues early, we are better positioned to evaluate them, request data, and consider appropriate solutions. I strongly encourage market participants to continue submitting comments, raising operational questions, and flagging emerging challenges. The Commission’s dedicated Treasury Clearing Implementation webpage is updated as new actions are completed, and you should monitor it closely.
Let me close by looking ahead. The compliance date for cash Treasury transactions is quickly approaching on December 31, 2026. The compliance date for repo transactions follows shortly after, on June 30, 2027. It is critical that market participants maintain momentum on their implementation efforts as the SEC does not currently intend to extend these deadlines. The SEC remains committed to continuing its dialogue with industry, providing timely guidance and taking action where needed to support a smooth and efficient transition well beyond the compliance dates. Successful implementation will require ongoing collaboration, careful attention to detail, and continued engagement from all stakeholders.
Thank you for your time today, and thank you for your partnership in strengthening the efficiency and resilience of the U.S. Treasury market. I look forward to continuing our work together.
