On December 13, 2023, the Securities and Exchange Commission (the "SEC") voted 4-1 to approve final rule changes(the "Final Rules") addressing a number of points relating to the clearing of US Treasuries ("USTs"). Given the size of the UST market ($26 trillion, approximately 95% of the US gross domestic product), the SEC places great emphasis on the impact UST securities have on the global economy, citing a number of events over the past few years as the reason for the reforms required under the Final Rules.
Specifically, the Final Rules: (i) require covered clearing agencies that provide central counterparty services for US Treasury securities ("UST CCPs") to have policies and procedures requiring their direct participants ("Members") to submit certain eligible secondary market transactions ("Covered Transactions") for clearing; (ii) require UST CCPs to have policies and procedures to calculate, collect, and hold margin for their Members' proprietary transactions ("house margin") separately from margin for transactions submitted on behalf of indirect participants ("customer margin"); (iii) require UST CCPs to have policies and procedures to facilitate access to clearance and settlement services of all Covered Transactions, including those of indirect participants; and (iv) modify the reserve formula in the broker-dealer customer protection rule to permit margin that is required and on deposit at a UST CCP to be recorded as a debit item (currently, it is not, but this change will allow broker-dealers to collect margin from their customers and pass such margin on to the UST CCP).
Click here to read the full insight: "Uncle Sam Wants U ... S Treasury Trades Cleared"
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