Industry Leaders Urge Congress to Fix SEC Clearing Mandate
In testimony before the Task Force on Monetary Policy of the House Financial Services Committee, industry leaders urged additional reforms in advance of implementation of the SEC's clearing mandate.
Managing Director at UBS Tom Wipf supported the clearing mandate intended to bolster the resiliency of the US Treasury market. He underscored that the final version of the SEC Treasury Clearing Rule was a foundational shift in market structure. Mr. Wipf welcomed the SEC's decision to "extend the implementation date for mandated central clearing," but stressed that further regulatory clarity was essential. He flagged concerns about the rule's overall scope—specifically the treatment of mixed-CUSIP tri-party repos and the limited utility of the inter-affiliate exemption. He warned that without targeted adjustments, the rule could disrupt liquidity and hinder effective risk management. He noted that SIFMA was working with market participants to "develop standardized documentation, policies and procedures" to ease the shift toward central clearing.
ISDA CEO Scott O'Malia warned that the success of the SEC's clearing mandate depended on resolving key capital and regulatory issues. He emphasized that the Supplementary Leverage Ratio ("SLR") must be recalibrated to avoid constraining "bank intermediation," particularly during market stress. He also warned that the US Basel III endgame and G-SIB surcharge would impose disproportionate capital burdens, increasing costs for client clearing "by more than 80%." He urged regulators to align capital rules with actual risk to preserve liquidity and access.
Mr. O'Malia also emphasized the need (i) for margin and capital frameworks to reflect the full portfolio risk of client exposures and (ii) to enable cross-margining for Treasury cash, repo and futures. He called for swift approval of clearinghouse models and client documentation, noting that global implementation will require legal clarity, operational readiness and sufficient time. While welcoming the SEC's one-year delay in compliance, he cautioned that without further policy adjustments, the clearing mandate could "strain" bank balance sheets and disrupt collateral flows.