Key actions to consider under the extended Treasury clearing deadlines

SEC response and market impact

On February 25, 2025, the SEC extended compliance dates for mandatory Treasury clearing by a year. The new deadlines are December 31, 2026, for eligible cash market transactions and June 30, 2027, for eligible repo transactions. Additionally, the SEC granted a temporary exemption for CCAs to confirm that margin collected for proprietary U.S. Treasury positions is calculated and held separately from margin for transactions involving indirect participants — which drives the house and customer account separation requirements set forth by the Fixed Income Clearing Corporation (FICC). This temporary exemption may allow for a longer implementation timeline for FICC members from the original March 31, 2025, compliance date up till September 30, 2025, subject to FICC discussion and agreement.

While compliance remains critical, this additional time allows firms to reprioritize projects, budgets and resources. Some firms may continue pursuing access models, such as direct clearing for in-house activities or sponsoring clients, to enhance processing efficiencies and achieve balance sheet netting opportunities. Others with limited activity may reevaluate their programs to prioritize strategic solutions that will allow them to adapt to further changes in the US Treasuries market.

So what should firms do now?

• Continue to monitor and contribute to industry development of done-away model and new CCAs entrants.
  
  
• Continue coordination and planning with FICC regarding intended access model(s) and understanding of FICC Rulebook changes.

• Assess the near-term impacts on your firm’s ongoing programs and business strategy and use this extended timeline to adjust priorities and budgets, focusing on initiatives that enhance your firm’s UST clearing capabilities for a smoother transition to USTC.
  
  
• Consider a strategic review of your firm’s clearing models for fixed income securities. This is a good time to evaluate self-clearing vs. third-party options to align with core USTC requirements.
  
  
• Explore more “strategic” affiliate clearing models to potentially streamline UST trading and reduce reliance on agent banks in EMEIA and Asia-Pacific.
  
  
• Continue to explore potential options to offer client clearing solutions. Sell-side firms that plan to sponsor and become agent clearing members (ACMs) should consider continuing the onboarding effort with FICC and clients, while buy-side firms may want to reconsider direct membership as market conditions evolve.

As the SEC’s central clearing mandate evolves, it's crucial that firms adapt their strategies and priorities. The six-month temporary exemption and one-year extension offer a valuable opportunity to reassess your firm’s approach to UST clearing, ensuring compliance while enhancing operational efficiency.

Ernst & Young LLP (EY US) welcomes continued conversation and engagement with clients and market participants on this important topic.