The US’ Securities and Exchange Commission (SEC) has adopted rule changes applicable to the US treasury market that will require more trades to be centrally cleared. In a statement in a press release, SEC chair Gary Gensler pointed out that the treasury funding market and cash markets have, respectively, close to and more than 80 percent of trades uncleared, which can increase system-wide risk. The aim of the new rules is to enhance risk management practices for CCPs in the sector.
Under the amendments, covered clearing agencies in the US treasury market will have to adopt procedures that require their members to submit for clearing certain secondary market transactions. This includes, for example, the repurchase and reverse repurchase agreements collateralised by US treasury securities entered into by a member of the covered clearing agency. Exemptions apply when it is an inter-affiliate transaction, or the counterparty is a state or local government or another clearing organisation.
The new rules also cover margin requirements. Under certain conditions, broker-dealers are now allowed to include customer margin required and on deposit at a clearing agency in the US treasury market as a debit in the customer reserve formula. Covered clearing agencies are now required to collect and calculate margin for house and customer transactions separately. In addition, clearing agencies must have procedures designed to ensure that they have the means to facilitate access to clearing, including for indirect participants.