The Securities and Exchange Commission's new rule requiring centralized clearing of U.S. Treasury securities by 2026 faces pushback from Wall Street. Trade associations, including SIFMA, argue that a one-year extension is necessary to ensure a smooth transition and avoid market disruptions. The SEC adopted the rule in December 2023 to reduce systemic risk in the $28 trillion Treasury market. Implementation will occur in phases, with a final deadline of June 2026. Critics argue that the remaining two years might not be enough to prepare for the significant changes the rule will bring.
Wall Street is urging regulators to grant them more time to implement a rule mandating centralized Treasury clearing. Banks and funds trading U.S. government bonds are currently facing a 2026 deadline. The Sec urities and Exchange Commission ( SEC ) adopted new rules in December 2023 aimed at mitigating systemic risk within the $28 trillion Treasury market, the world's largest bond market.
These rules will compel a greater proportion of trades to flow through clearinghouses, providing the agency with enhanced visibility into the market. Implementation will occur in phases, culminating in June 2026. The Securities Industry and Financial Markets Association (SIFMA), alongside other trade associations, sent a letter to the SEC on Friday requesting a minimum one-year extension for the cash and repo clearing deadlines. While acknowledging the rule's potential benefits, SIFMA and the letter's signatories highlighted the Treasury market's critical role in the financial system and economy, coupled with the anticipated surge in Treasury securities issuance in the coming years. They argued that a more extended implementation timeline would facilitate a smoother transition, preventing market disruptions. Other signatories include MFA, representing hedge funds and private funds, the Alternative Investment Management Association, FIA Principal Traders Group, and the International Swaps and Derivatives Association. The letter asserted that without an extension, the transition to central clearing would be severely jeopardized, inevitably leading to disruptions in cash and repo markets for Treasury securities, ultimately harming the financial system. Reuters reported last year that a timeline extension was under consideration as crucial details regarding mandatory central clearing remained undefined. Market participants expressed concerns that the remaining two years might be insufficient for a successful transition. The original rule stipulated that clearinghouses would have until March 2025 to comply with provisions concerning risk management, customer asset protection, and access to clearance and settlement services. Their members would have until December 2025 to commence central clearing of cash market Treasury transactions and June 30, 2026, for repo transactions
Wall Street SEC Treasury Market Centralized Clearing Systemic Risk Implementation Deadline SIFMA
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