Central clearing for treasuries and repos/reverse repos remains a key preoccupation within the capital markets space, so it was no surprise that the topic was front and center at the recent SIFMA Ops conference in San Diego. The clock is ticking down, with cash clearing required to go live by the end of 2025 and repo clearing by June 30, 2026.

For firms active in Treasury trading and/or financing, the shift to mandatory central clearing presents a series of legal, operational, and risk management challenges. Ensuring compliance goes beyond operations, technology and data changes, and specifically impacts client onboarding and repapering, collateral management and liquidity forecasting. Implementations will require a structured change management program to meet the initial December 31, 2025 deadline.

Unlike the adoption of T+1, implementation of the new Treasury Clearing Rules will not be a ‘big bang’ type of event but rather a phased-in set of activities over the course of the next 15 months. All financial market participants, including broker-dealers, institutional investors, interdealer brokers, principal trading firms, and covered clearing agencies, will be impacted. The DTCC expects a $4 trillion increase in FICC’s daily treasury clearing activity as a result of the Rules’ adoption.

With deadlines fast approaching, where should market participants focus their attention? Some of the very first considerations include:

• identify what transactions you conduct today that are eligible
  
• how are you going to get these transactions cleared, and the required access models
  
• margin risk management and the payment arrangements for transactions
  
• putting a change management program in place, including the required people, processes, and legal staffing.

Additional select considerations include:

• target operating models for rates trading and repo businesses
  
• client engagement strategy
  
• operational capabilities to receive/post margin intraday, including cross-margining arrangements
  
• potential technology upgrades required to facilitate new and expanded flows
  
• implications for internal credit risk limits, balance sheet, risk-based capital, and leverage requirements.

It was highlighted during one SIFMA Ops workshop that, while the Fixed Income Clearing Corp’s Sponsored Service continues to be the preferred approach for repo transactions, there is an increased interest in usage of the agency clearing model. There is also an increase in the adoption of a done-away clearing model for indirect participants.

That said, if not already in flight, market participants need to allocate the proper level of attention and resourcing to the following five key focus areas:

1. Determine a clearing access model.
   
2. Analyze the financial resource model components to understand commercial and liquidity impacts.
   
3. Estimate margin obligations, review collateral management process and determine changes required to support FICC margining.
   
4. Understand changes required to firm’s technology infrastructure and operating model to support the selected clearing access model.
   
5. Engage market utilities and middleware to develop market structure.

If you are interested in learning more about how your firm can navigate the complexity of the Treasury Clearing Rules, reach out to us using the form below.