DTCC has issued a statement in light of the recent amendments introduced by the Securities and Exchange Commission (SEC), set to significantly impact the US Treasury market.
DTCC has mentioned in a statement published on its website that it is taking the necessary measures to align with these amendments. The organization aims to facilitate discussions, offer guidance, and disseminate important information for the market participants navigating these changes.
These amendments bring forth added regulatory clarity, outlining extensive clearing requirements and defining implementation timelines. The implications of these regulations are poised to shape the future of the US Treasury cash and repo markets. The regulator requires a substantial portion of secondary market transactions to be centrally cleared by specified deadlines.
SEC Stipulates Deadlines for Clearing Transactions
These rules, published by the SEC on December 13, mandate clearinghouses to expand the scope of cleared transactions. They emphasize the necessity for members to clear all repo and reverse repo transactions. According to the regulator, this mandate aims to address the growing volume of transactions to enhance market resilience and reduce risk.
These rules outline a phased implementation over two-and-a-half years, stressing cooperation and coordination with entities like the Federal Reserve, the US Department of the Treasury, and the Commodity Futures Trading Commission.
The SEC's amended rules, designed to expand US Treasury clearing , set stringent timelines for compliance. By December 31, 2025, cash transactions, particularly eligible secondary market transactions, must undergo central clearing. Additionally, the deadline for repo transactions stands at June 30, 2026.
These regulations, aimed at enhancing efficiency, competition, and resilience, occur as a significant milestone in the evolution of the capital markets, particularly the $26 trillion Treasury market.
By implementing these regulations, the SEC aims to bolster customer protection and market competition by altering margin posting protocols. Entities will no longer be able to net customers' positions against their proprietary positions. This ensures increased safeguards for customers and the clearinghouses.
DTCC Expands Services
Recently, DTCC introduced a cloud-based service aimed at streamlining data access for real-time insights to investors in the derivatives markets. Dubbed OTC Direct Connect, this service aims to enable access to critical market data, enhancing users' ability to mitigate risks associated with trading activities.
The landscape of OTC derivatives regulation is evolving globally, with a recent comprehensive rule introduced by Canadian securities regulators. This rule aims to enhance transparency, accountability, and ethical practices within Canada's OTC derivatives market, mirroring international standards.
