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The SEC's central clearing mandate: seven actions for March 2025 compliance

Photographic potrait of Neal Ullman
Neal Ullman

Managing Director, Banking and Capital Markets Consulting, Ernst & Young LLP

02 minute read 25 Feb 2025

Prepare for the SEC's central clearing mandate: FICC participants must act by March 31, 2025, to ensure compliance with the new requirements.

FICC participants need to:
  • Conduct data analysis on clearing activities to find instances of commingling proprietary and customer or affiliate transactions that require separation into distinct FICC accounts before the March 31 deadline.
  • Determine the FICC access models to support the clearing of previously commingled proprietary and customer activities.
  • Remediate in-scope inter-affiliate transactions cleared through your firm’s main U.S. Treasuries account to ensure compliance by the March 31 deadline.

Note: At the time this article is being written, industry advocacy efforts to extend the compliance dates for the U.S. Treasury clearing mandate have been submitted to the SEC. However, firms are encouraged to continue their implementation activities in preparation for the March 31, 2025, deadline, regardless of the pending SEC decision on the extension.

The SEC is reshaping the U.S. Treasuries market with a new mandate for central clearing of eligible cash trades by the end of 2025 and repo transactions by mid-2026. As part of the transition to mandatory clearing, existing direct participants of Fixed Income Clearing Corporation (FICC) have actions to take before March 31, 2025, to ensure they are compliant with requirements set forth in FICC’s updated rulebook. Seven suggested actions are:

How EY can help

  1. Performing data analysis of existing clearing activity to identify instances of commingling proprietary and customer/affiliate activity that require separation to comply with FICC’s revised account structure

  2. Determining suitable access models to continue clearing of separated activities and setting up the right account structure with FICC on associated applications and account designation forms

  3. Updating booking model and post-trade process to align to new account structure

  4. Remediating in-scope inter-affiliate transactions that are cleared through your firm’s main U.S. Treasuries clearing account and
    • Evaluating eligibility of inter-affiliate exemptions
    • Considering onboarding affiliate activities to the Sponsored or Agent Clearing Model (ACM)
       
  5. Potentially becoming an agent clearing member and setting up customer symbols for trade submission to maintain the provision of customer clearing services in a Correspondent/Prime Broker clearing capacity

  6. Designating a Segregated Indirect Participants Account if your firm decides to collect and deposit customer margin with FICC by March 2025

  7. Aligning to the additional activities outlined in the FICC Treasury Clearing Client Roadmap¹, such as (i) configuring the Domain Name System (DNS) to the new FICC Report Center, (ii) ACMs supplying Legal Entity Identifiers (LEIs) for existing executing firm customers, (iii) trade submission validation and Machine Readable Output (MRO) testing, (iv) provisioning access to Clearing Fund Management (CFM)

 

Are you ready for the first set of changes for the transition to USTC? Stay ahead of the curve and navigate the complexities of this mandate with confidence.

Elaine Li also contributed to this article.


Summary 

The SEC's central clearing mandate for U.S. Treasuries is set to reshape market structure with aspects from Fixed Income Clearing Corporation (FICC)’s updated rulebook needed to be addressed by March 31, 2025. Firms need to take proactive steps, including analyzing clearing activities, establishing suitable access models and updating account structures. Additional actions involve remediating inter-affiliate transactions and ensuring proper designation of accounts. As the deadline approaches, firms should stay informed and prepared to navigate these changes effectively.

About this article

Photographic potrait of Neal Ullman
Neal Ullman
Managing Director, Banking and Capital Markets Consulting, Ernst & Young LLP
Senior advisor with deep industry experience in capital markets. Strategist with a focus on business transformation and client delivery. Builder of global teams.
Related topics
Banking and capital markets
Consulting
Financial services

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