The Securities and Exchange Commission pushed back the compliance dates for a rule that mandates more U.S. Treasury market trades be settled by a clearing agency.
The agency in December 2023 approved a rule to require most market participants, including broker-dealers and institutional investors, to centrally clear cash and repo trades in the $28.5 trillion U.S. Treasury market.
Under the rule, the affected transactions include repurchase and reverse repurchase agreements, known as "repos," that are collateralized by Treasury securities and to which a clearing agency member is a counterparty. They also include "all purchases and sales of U.S. Treasury securities by direct participants who are acting as inter-dealer brokers" and all purchases and sales between a member and a registered broker-dealer, government securities broker or government securities dealer, according to an SEC fact sheet.
The SEC on Feb. 12, now led by acting Chair Mark T. Uyeda, announced that it would extend the compliance dates for both the covered cash and repo transactions by one year.
Treasury cash clearing will now go into effect by Dec. 31, 2026, and repo clearing will now go into effect by June 30, 2027, the SEC announced.
“The U.S. Treasury market is a critical piece of the global financial system,” Uyeda said in a statement. “New rules must be implemented properly, and any operational issues must be addressed. This one-year extension provides additional time to implement and validate operational changes. Direct participants will also have more time to implement important risk management changes to comply with U.S. Treasury-covered clearing agency rules. The commission stands ready to engage with market participants on issues associated with implementation.”
Kenneth E. Bentsen Jr., president and CEO at the Securities Industry and Financial Markets Association, welcomed the SEC’s action.
“Given the importance of the Treasury market to the financial system and the economy, along with the expected significant issuance of Treasury securities in the coming years, it is essential that the implementation timeline for the clearing rules allows for a smooth transition so as not to disrupt this market,” Bentsen said in a statement.
