SEC Delays Key Treasury Clearing Rule, Citing Market Risks

The SEC has extended key compliance deadlines for mandatory central clearing in the U.S. Treasury market by one year. This delay follows Wall Street concerns that the original timeline was too aggressive and could disrupt market stability. SIFMA supported the extension, citing the need for a smoother transition and the development of cross-margining capabilities. The Fixed Income Clearing Corporation (FICC) and CME Group are working to integrate cash and futures markets for improved capital efficiency. The new enforcement deadline allows firms more time to adjust systems and mitigate risks. Regulators and industry stakeholders will continue refining the framework to ensure stability.

SEC Delays Key Treasury Clearing Rule, Citing Market Risks

On Tuesday, the U.S. Securities and Exchange Commission (SEC) announced a one-year extension for key compliance deadlines related to a major reform aimed at reducing systemic risk in the $28.5 trillion U.S. Treasury market. The reform, which mandates that certain cash Treasury transactions and repurchase agreements (repos) be processed through clearinghouses, was originally set to be phased in by June 2026.

The SEC’s decision follows requests from several Wall Street trade associations last month, which urged a delay to prevent market disruptions. SEC Acting Chairman Mark Uyeda emphasized the importance of implementing these new rules correctly, stating that the extension would allow market participants additional time to address operational challenges.

The SEC, currently led by Uyeda alongside fellow commissioners Hester Peirce and Caroline Crenshaw, unanimously approved the delay. The commission is awaiting the confirmation of Paul Atkins, President Donald Trump’s nominee to lead the agency.

The Securities Industry and Financial Markets Association (SIFMA) supported the postponement, citing concerns that the original timeline was too aggressive and could introduce unnecessary risks to the critical Treasury market.

While the SEC has maintained the March 2025 deadline for clearing agencies to adopt required risk management and access provisions, it extended the enforcement deadline for clearing members to September 30, 2025. Meanwhile, the deadline for central clearing of cash Treasury transactions has been pushed to December 2026, with repo transactions now set for mid-2027.

Clearinghouses, which act as intermediaries between buyers and sellers, require traders to post collateral, or margin, to cover potential losses. The Fixed Income Clearing Corporation (FICC), the primary clearer of Treasuries, is collaborating with CME Group to expand cross-margining capabilities. This initiative aims to improve capital efficiency by allowing brokers and their clients to offset margin exposure across cash and futures markets, ultimately reducing trading costs.

SIFMA previously argued that delaying the enforcement of new FICC rules would help maintain momentum on central clearing efforts, particularly the expansion of cross-margining. The association had advocated for a one-year extension, which the SEC has now granted.

SIFMA has consistently emphasized the importance of a carefully managed transition to mandatory central clearing in the U.S. Treasury market. The organization has expressed concerns that an overly aggressive implementation timeline could disrupt liquidity and increase operational risks for market participants. By granting a one-year extension, the SEC aims to provide clearinghouses, broker-dealers, and other financial institutions with the necessary time to adjust their systems and ensure compliance with the new framework.

One of the key aspects of the reform is the expansion of cross-margining, which allows traders to offset margin requirements across different markets, reducing capital costs and improving efficiency. The Fixed Income Clearing Corporation (FICC) and CME Group have been working on enhancing this capability to integrate cash and futures markets more effectively. By delaying enforcement, the SEC is giving market participants additional time to refine these processes and ensure a smooth transition without unintended consequences.

Market experts have noted that while central clearing can reduce counterparty risk and enhance market stability, a rushed implementation could lead to increased costs and potential disruptions. The extension provides an opportunity for further collaboration between regulators and industry stakeholders to fine-tune the clearing framework while maintaining market stability and liquidity.