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Treasury & Capital Markets
New rules seen boosting treasury clearing volumes by US$4 trillion daily
Sellside firms to use prime brokerage, agency clearing and FCM businesses to clear trades
The Asset 5 Jun 2024

The Depository Trust & Clearing Corporation (DTCC), a New York-based post-trade services provider, expects daily treasury volumes through its Fixed Income Clearing Corporation (FICC) to rise by over US$4 trillion once the US Securities and Exchange Commission’s (SEC) expanded treasury clearing rules take effect.

The new estimate, up from the original calculation of about US$1.63 trillion in September 2023, was based on a recent survey involving 83 sellside institutions following the release of the SEC’s final treasury clearing rules. The FICC currently processes roughly US$7 trillion of treasury trading daily.

Last December, the SEC adopted rules requiring more US treasury trades to be done through clearing houses in a bid to reduce systemic risks in the US$27 trillion market.

The new rules as they pertain to central clearing of cash transactions will take effect on December 31 2025, and that for repurchase and reverse repurchase trades will be enforced starting June 2026.

“While expanding treasury clearing will be an important structural change for all treasury market participants, we view it as a logical expansion of the services we provide and consistent with FICC’s mission,” says Brian Steele, DTCC’s managing director and president of clearing and securities services.

One area that continues to be discussed across the industry as a result of the new SEC rules is the treatment of “done-away” activity, which is a type of US treasury activity executed by a client with one counterparty but cleared by a firm different from the executing counterparty.

Almost 30% of sellside institutions that responded in the survey plan to facilitate cleared US treasury activity out of either their prime brokerage, agency clearing or futures commission merchant (FCM) business lines, all of which traditionally offer “done-away” execution as part of their core client clearing services.

“There has been much discussion around done-away activity in connection with treasury clearing, with many buyside firms concerned that client clearing services would only be offered by sellside firms’ repo desk businesses, without done-away capabilities,” says Laura Klimpel, DTCC’s managing director and head of fixed income and financing solutions.

“What we are seeing now from the survey data is an emerging sellside trend to address this challenge, with firms now looking to also leverage their prime brokerage, agency clearing and FCM businesses to clear clients’ treasury transactions.”

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