Preparing for U.S. Treasury Central Clearing

In late 2023, the U.S. Securities and Exchange Commission (the SEC) adopted rules (the U.S. Treasury Clearing Rule) that, among other things, mandate SEC-registered clearing agencies that clear U.S. Treasury security repurchase/reverse repurchase and cash transactions as central counterparties (Treasury CCPs) to adopt policies and procedures that require their direct participants (entities that access CCPs directly as opposed to indirectly) to submit all “eligible secondary market transactions” in U.S. Treasury securities for central clearing and settlement.

Currently, the only Treasury CCP is the Depository Trust and Clearing Corporation’s (DTCC) Fixed Income Clearing Corporation (FICC). However, CME Group and Intercontinental Exchange (ICE) have each announced plans to establish Treasury CCPs to clear eligible secondary market U.S. Treasury transactions. CME Securities Clearing (CMESC), which will be a newly established subsidiary of CME Group, has filed an application with the SEC for registration as a clearing agency. ICE intends to clear such transactions through ICE Clear Credit, which is already an SEC-registered clearing agency.

Subject to certain exemptions and exclusions, “eligible secondary market transactions” include:

Repo transactions: All repurchase, and reverse repurchase transactions collateralized by U.S. Treasury securities entered into by a direct participant of a Treasury CCP; and
Cash transactions: All purchases and sales of U.S. Treasury securities between a direct participant and (i) any counterparty, if the direct participant is acting as an interdealer broker, or (ii) a registered broker-dealer, government securities dealer, or government securities broker.

The SEC expects the U.S. Treasury Clearing Rule to reduce risk, improve investor protection, and drive increased efficiency in the U.S. Treasury market.

On February 25, 2025, the SEC announced 12-month extensions to the compliance dates originally established in the U.S. Treasury Clearing Rule. Per the extensions, Treasury CCP direct participants will be required to commence clearing cash transactions by December 31, 2026, and repo transactions by June 30, 2027.

Existing U.S. Treasury clearing models at FICC:
- Bank of America’s ‘done-with’ sponsored delivery-versus-payment (DVP) repo and sponsored general collateral (GC) repo services
- Bank of America’s Agent clearing service for cash transactions (non-repo)
Future offerings under review:
- Central counterparty (CCP) cross-margining support for U.S. Treasury repo or cash transactions and futures transactions
- FICC ‘done-with’ sponsored repo models with segregated customer margin
- FICC ‘done-away’ Agent clearing service models featuring either segregated customer margin (with CCP-level gross margining) or non-segregated margin (with CCP-level net margining)
- All other planned Treasury CCP offerings including CMESC, ICE, and any others yet to be announced
- Participation in repo clearing offered by LCH and Eurex is also under review

A: On December 13, 2023, the SEC adopted the U.S. Treasury Clearing Rule, which, among other things, will mandate Treasury CCPs to require their direct participants to clear eligible secondary market transactions in U.S. Treasury securities. Further, on February 25, 2025, the SEC announced its decision to extend the compliance dates with phased implementation occurring over the next two years:

Direct participants will be required to centrally clear eligible cash transactions by December 31, 2026, and eligible repo transactions by June 30, 2027
Amendments requiring improvements to CCP risk management practices, protection of customer assets and requirements to facilitate access to clearance and settlement services have a compliance date of September 30, 2025

For more information on the U.S. Treasury Clearing Rule, please view the SEC’s Final Rule Overview which includes more information on eligible secondary market transactions and applicable exemptions.

A: Helpful links with information on the various finalized rules can be found below. Note: the links are provided for information purposes only and the rules or regulations may be amended from time-to-time. Counterparties should refer to the most recent version of the relevant rules or regulations and speak with their own lawyers and advisors.

U.S. Treasury Clearing: A Depository Trust and Clearing Corporation (DTCC) website with links to FAQs, FICC Office Hours, documentation, news, an implementation playbook, a detailed client road map, and other resources for market participants
Treasury Clearing: A Securities Industry and Financial Markets Association (SIFMA) website providing an overview of key requirements with links to news and statistics

A: Since the SEC adopted the U.S. Treasury Clearing Rule in December 2023, Bank of America has been laying the groundwork to support a smooth transition for affected clients. Further, Bank of America is participating in the relevant industry forums and is actively engaged with FICC on matters related to the U.S. Treasury Clearing rule. In addition, a Bank of America representative will be reaching out to impacted clients to ensure continued access to the U.S. Treasury market. For any questions related to U.S. Treasury and Repo Clearing, please direct inquiries to a client service representative or sales contact.

A: At the time of publication, FICC is the sole SEC-registered clearing agency that is acting as a Treasury CCP to clear U.S. Treasury cash and repo transactions. Bank of America is and will remain a Netting Member at FICC through its member entities (BofA Securities and Bank of America, National Association) and will continue to explore the emerging offerings of other CCPs as details become available.

A: At the time of publication, the ‘done-away’ repo clearing model is being developed and refined by Bank of America, the broader industry, CCPs, and both buy- and sell-side market participants. Bank of America intends to continue to explore the emerging ‘done-away’ clearing model to provide clients with clearing solutions that best align with their trading activity.

A: Bank of America has an existing Agent clearing service with FICC (previously known as the “correspondent clearing” model) in which Bank of America facilitates client cash transactions that are purchases/sales of U.S. Treasuries as a clearing Agent. As industry solutions enabling ‘done-away’ repo clearing mature, Bank of America plans to introduce an Agent clearing service for repo and will provide additional information when details become available.

A: Bank of America is currently exploring all available solutions to provide clients with a broad suite of solutions for clearing U.S. Treasury repo and cash transactions. Outlined below are the primary solutions currently under review and as the market matures, these solutions may evolve further:

Bank of America’s existing FICC ‘done-with’ sponsored DVP repo model and sponsored GC repo model
Bank of America’s existing FICC Agent clearing service for purchases/sales of U.S. Treasuries (non-repo)
CCP cross margining support for U.S. Treasury repo or cash transactions
FICC ‘done-with’ sponsored repo models with segregated customer margin
FICC ‘done-away’ Agent clearing service models featuring either segregated customer margin (with CCP-level gross margining) or non-segregated margin (with CCP-level net margining)
All other planned Treasury CCP offerings including CMESC, ICE, and any others yet to be announced
Participation in repo clearing offered by LCH and Eurex is also under review

Preparing for U.S. Treasury Central Clearing

Overview

Key Takeaways

Bank of America will continue to provide access to U.S. Treasury clearing services through existing FICC access models and is planning to introduce additional clearing solutions in-line with market expectations.

Frequently Asked Questions

Preparing for U.S. Treasury Central Clearing

Overview

Key Takeaways Bank of America will continue to provide access to U.S. Treasury clearing services through existing FICC access models and is planning to introduce additional clearing solutions in-line with market expectations.

Frequently Asked Questions

Q: What is the U.S. Treasury Clearing Rule?

Q: Where can I learn more about the U.S. Treasury Clearing Rule and its effects on market participants?

Q: How is Bank of America preparing for the U.S. Treasury Clearing Rule?

Q: How can I ensure I have access to U.S. Treasury clearing services once the rule is live?

Q: Which CCPs will facilitate clearing of the mandated activity, will Bank of America be a member, and will other CCPs emerge in response to the SEC’s mandate?

Q: Will Bank of America provide access to U.S. Treasury clearing for ‘done-away’ repo transactions?

Q: Will Bank of America support an Agent clearing model?

Q: Which clearing access models does Bank of America plan to offer?

Key Takeaways

Bank of America will continue to provide access to U.S. Treasury clearing services through existing FICC access models and is planning to introduce additional clearing solutions in-line with market expectations.