SEC approves extension of Treasury clearing compliance dates

In December 2023, the SEC adopted a final rule (the Rule) that will require covered Treasury clearing agencies (CCAs)¹ to mandate that their direct participants submit for clearing all eligible US Treasury cash and US Treasury repurchase transactions. The Rule also requires CCAs to facilitate access to clearing services to all market participants and to provide for the separation of customer and proprietary margin posted by market participants in connection with the clearance and settlement of eligible transactions. The SEC set up compliance with the Rule in three stages: CCAs must adopt new policies and procedures required under the Rule by March 31, 2025; direct participants must comply with the new clearing mandate for cash Treasury transactions by December 31, 2025; and direct participants must comply with the new clearing mandate for repo Treasury transactions by June 30, 2026. 

Several gating issues for implementation of the Rule remain unresolved. In particular, in its notice of the extension of compliance dates, the SEC flagged (1) the development of a “done-away” market structure (critical to expanding access to all market participants to clearing services); (2) standard documentation and supporting legal opinions necessary for market participants to establish clearing relationships with CCAs and their direct participants; (3) a significant onboarding process required for direct participants and clients which will take time and resources to complete; and (4) the lack of critical middleware solutions and platforms, as well as proper payment and margin flows and accounting treatment to facilitate the Treasury clearing transition.

After considering requests from market participants and trade associations, the SEC pushed back the Rule’s compliance dates one year, with the requirement for direct participants to clear eligible cash market transactions moving from December 31, 2025, to December 31, 2026, and for eligible repo transactions from June 30, 2026, to June 30, 2027. The SEC did not extend the March 31, 2025, compliance date for its requirements that CCAs revise their policies and procedures to facilitate access to clearing and require segregation of customer and proprietary margin, as no market participant is obligated to use a particular access model or to segregate its margin as of the compliance date. However, the SEC has separately issued temporary exemptive relief that provides that CCAs need not enforce their new rules for margin segregation against direct participants until September 30, 2025.²