A recent survey by the Depository Trust & Clearing Corporation (DTCC) indicates significant improvements in the financial industry’s understanding and preparedness for expanded U.S. Treasury clearing. The findings, detailed in a white paper titled “The U.S. Treasury Clearing Mandate: An Industry Pulse Check,” highlight how industry participants are adapting to the U.S. Securities & Exchange Commission’s (SEC) expanded clearing rules.

The survey, conducted by DTCC’s subsidiary, Fixed Income Clearing Corporation (FICC), projects a substantial increase in daily treasury clearing activity, with volumes expected to rise by over US$4 trillion, reaching a total of US$11.5 trillion. Indirect participant Repo activity is anticipated to drive 58 per cent of this additional volume. FICC’s Sponsored Service remains the preferred access model for indirect participants, with 74per cent of respondents favouring it, and growing interest in the Agent Clearing Member (ACM) Service, noted by 43 per cent of respondents. FICC expects to establish over 7.000 new intermediary-indirect participant relationships.

The survey also indicates an expected increase in the adoption of done-away clearing for indirect participants, with 28 per cent planning to facilitate Treasury clearing through business areas offering done-away execution. The anticipated rise in clearing activity is expected to proportionally increase margin requirements, with an aggregate margin (VaR) increase estimated at US$58.4 billion, including US$27 billion representing segregated indirect participant margin.

CCLF

Additionally, maximum daily liquidity needs could reach US$84.5 billion, suggesting a total Capped Contingency Liquidity Facility (CCLF) size of US$109.9 billion under current parameters. Since 2021, the CCLF size has ranged from US$71.0 billion to $128.4 billion.

Brian Steele, DTCC managing director, notes the industry’s improved understanding and preparedness for expanded clearing since the previous survey in 2023. Laura Klimpel, head of DTCC’s Fixed Income and Financing Solutions, emphasises the importance of updated information to support firms in transitioning to the new clearing requirements and ensuring a smooth implementation process.