The Securities and Exchange Commission (SEC) is in talks with firms keen on becoming central clearinghouses for US treasuries and derivatives trading. Haoxiang Zhu, director of the SEC’s division of trading and markets, confirmed this during a virtual discussion hosted by the Institute of International Finance, according to Bloomberg (paywalled).
The talks are a result of new rules that were finalised by the SEC in December. These rules require the migration of a large segment of treasuries trading and almost all repurchase agreements linked to the debt to a central counter-party clearinghouse, or CCPs.
Multiple market participants have expressed interest in entering this sector. Zhu emphasised the SEC’s openness to additional players, citing the potential benefits of competition in the market.
Currently, the Fixed Income Clearing Corporation (FICC), a part of the Depository Trust & Clearing Corporation (DTCC), is the only central clearing party for the 27 trillion USD treasury market. However, only about 13 per cent of daily cash treasuries trading fully runs through the FICC.
Increasing resilience
Efforts to set up new treasuries clearinghouses line up with long-term regulatory plans aimed at making the market more resilient following multiple trading freezes. Nathaniel Wuerffel, head of market structure at BNY Mellon, speculated during the virtual discussion that the SEC’s new rules might draw an additional three trillion USD in daily cash and repo trading into central clearinghouses.
The new clearinghouses are expected to be fully implemented, including repo transactions, by mid-2026.