SEC Proposes Rules to Improve Risk Management in Clearance and Settlement and to Facilitate Additional Central Clearing for the U.S. Treasury Market
The SEC proposed rule changes to enhance risk management and increase central clearing in the U.S. Treasury market.
The Securities and Exchange Commission proposed rule changes to enhance risk management and increase central clearing in the U.S. Treasury market. The proposal requires clearing agencies to mandate members to submit specified secondary market transactions, such as repo agreements and trades involving broker-dealers and hedge funds, for central clearing. Additionally, the rules mandate separate margin calculations for house and customer accounts and allow broker-dealers to count clearinghouse margin toward customer reserve requirements.
The Securities and Exchange Commission proposed rule changes to enhance risk management and increase central clearing in the U.S. Treasury market. The proposal targets covered clearing agencies, requiring them to adopt stricter membership standards and policies that mandate the clearing of specific secondary market transactions, such as certain repurchase agreements and interdealer broker trades. While no specific fraud is alleged, the regulatory action seeks to address systemic risks by expanding the scope of centrally cleared activity, which stood at only 13 percent in 2017. The proposed changes also include new requirements for margin calculation and customer reserve formula treatments to ensure market resilience. The rules would require clearing agencies to mandate members to submit specified secondary market transactions for central clearing, including repo agreements and trades involving broker-dealers, hedge funds, and interdealer brokers. The proposal also mandates separate margin calculations for house and customer accounts and allows broker-dealers to count clearinghouse margin toward customer reserve requirements under conditions. No fines, charges, or resolution of misconduct are involved, as this is a preventive regulatory initiative. The goal is to raise the currently low 13% central clearing rate for Treasury transactions, aligning with the SEC’s mission to promote efficient, competitive, and stable markets.
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- agency sec chair gary gensler
- agency Securities and Exchange Commission
- agency the sec plays a critical role in how the treasury market functions
- person treasury cash transactions
- Securities And Exchange Commission Proposed Rule changes that would enhance risk management practices for central counterparties in the U.S. Treasury market
- Proposed Rule Changes Would Update Membership standards required of covered clearing agencies for the U.S. Treasury market
- SEC Chair Gary Gensler Said The SEC plays a critical role in how the Treasury market functions
- Treasury Cash Transactions Were Centrally Cleared (13 Percent) In 2017
- Proposal Would Require Clearing agencies in the U.S. Treasury market to adopt policies and procedures designed to require their members to submit certain specified secondary market transactions
- Proposal Would Permit Broker-dealers to include margin required and on deposit at a clearing agency in the U.S. Treasury market as a debit in the customer reserve formula
- Proposal Would Require Clearing agencies in this market to collect and calculate margin for house and customer transactions separately
- Public Comment Period Will Remain Open For 60 days following publication of the proposing release in the Federal Register
The Securities and Exchange Commission today proposed rule changes that would enhance risk management practices for central counterparties in the U.S. Treasury market and facilitate additional clearing of U.S. Treasury securities transactions. The proposed rule changes would update the membership standards required of covered clearing agencies for the U.S. Treasury market with respect to a member’s clearance and settlement of specified secondary market transactions. Additional proposed rule changes are designed to reduce the risks faced by a clearing agency and incentivize and facilitate additional central clearing in the U.S. Treasury market. “The Securities and Exchange Commission plays a critical role in how the Treasury market functions, including to help ensure that these markets stay efficient, competitive, and resilient,” said SEC Chair Gary Gensler. “One aspect of that role is our oversight of clearinghouses for Treasury securities. While central clearing does not eliminate all risk, it certainly does lower it. In 2017, however, only 13 percent of Treasury cash transactions were centrally cleared. Thus, I think there is more work to be done with respect to the amount of Treasury activity that is centrally cleared. I think that these rules would reduce risk across a vital part of our capital markets in both normal and stress times. This advances our three-part mission.” Specifically, the proposal would require that clearing agencies in the U.S. Treasury market adopt policies and procedures designed to require their members to submit for clearing certain specified secondary market transactions. These transactions would include: all repurchase and reverse repurchase agreements collateralized by U.S. Treasury securities entered into by a member of the clearing agency; all purchase and sale transactions entered into by a member of the clearing agency that is an interdealer broker; and all purchase and sale transactions entered into between a clearing agency member and either a registered broker-dealer, a government securities broker, a government securities dealer, a hedge fund, or a particular type of leveraged account. With respect to customer margin, the proposal would permit broker-dealers to include margin required and on deposit at a clearing agency in the U.S. Treasury market as a debit in the customer reserve formula, subject to certain conditions. In addition, the proposal would require clearing agencies in this market to collect and calculate margin for house and customer transactions separately. Finally, the proposal would require policies and procedures designed to ensure that the clearing agency has appropriate means to facilitate access to clearing, including for indirect participants. The proposing release will be published on SEC.gov and in the Federal Register. The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register.
The Securities and Exchange Commission today proposed rule changes that would enhance risk management practices for central counterparties in the U.S. Treasury market and facilitate additional clearing of U.S. Treasury securities transactions. The proposed rule changes would update the membership standards required of covered clearing agencies for the U.S. Treasury market with respect to a member’s clearance and settlement of specified secondary market transactions. Additional proposed rule changes are designed to reduce the risks faced by a clearing agency and incentivize and facilitate additional central clearing in the U.S. Treasury market. “The Securities and Exchange Commission plays a critical role in how the Treasury market functions, including to help ensure that these markets stay efficient, competitive, and resilient,” said SEC Chair Gary Gensler. “One aspect of that role is our oversight of clearinghouses for Treasury securities. While central clearing does not eliminate all risk, it certainly does lower it. In 2017, however, only 13 percent of Treasury cash transactions were centrally cleared. Thus, I think there is more work to be done with respect to the amount of Treasury activity that is centrally cleared. I think that these rules would reduce risk across a vital part of our capital markets in both normal and stress times. This advances our three-part mission.” Specifically, the proposal would require that clearing agencies in the U.S. Treasury market adopt policies and procedures designed to require their members to submit for clearing certain specified secondary market transactions. These transactions would include: all repurchase and reverse repurchase agreements collateralized by U.S. Treasury securities entered into by a member of the clearing agency; all purchase and sale transactions entered into by a member of the clearing agency that is an interdealer broker; and all purchase and sale transactions entered into between a clearing agency member and either a registered broker-dealer, a government securities broker, a government securities dealer, a hedge fund, or a particular type of leveraged account. With respect to customer margin, the proposal would permit broker-dealers to include margin required and on deposit at a clearing agency in the U.S. Treasury market as a debit in the customer reserve formula, subject to certain conditions. In addition, the proposal would require clearing agencies in this market to collect and calculate margin for house and customer transactions separately. Finally, the proposal would require policies and procedures designed to ensure that the clearing agency has appropriate means to facilitate access to clearing, including for indirect participants. The proposing release will be published on SEC.gov and in the Federal Register. The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register.