SEC Sets Comment Deadline on Proposed Expansion of Mandatory Central Clearing of Treasury Trades and Repos

Comments on an SEC proposal to require members of covered clearing agencies that provide central counterparty services for Treasury securities to centrally clear a significant number of their repo transactions are due by December 22, 2022. The Notice was published in the Federal Register.

As previously covered, the SEC proposal would amend SEA Rule 17Ad-22 ("Standards for Clearing Agencies") to require a clearing house's direct participant to centrally clear all transactions in Treasury securities if (i) the counterparty is a direct participant in the clearing house, (ii) the direct participant is acting as riskless principal or intermediary between multiple buyers and sellers and (iii) the counterparty is an SEC-registered broker-dealer, a government securities dealer, an account held at the foregoing that gets more than 2-1 leverage, or a hedge fund. The proposal would also amend SEA Rule 15c3-3 ("Customer Protection-Reserves and Custody of Securities") so that the margin the broker-dealer deposited at the clearing house with respect to customer trades would serve to reduce the amount the broker-dealer had to deposit in its special reserve account. Currently, the only clearing house with respect to which broker-dealer's receive this relief is the Fixed Income Clearing Corporation.