“Given the SEC’s rules around mandatory central clearing are now final and the industry’s understanding of their impact is becoming clearer, it is not surprising to us to see the incremental volume estimates hardening around US$4 Trillion daily.”a
Daily Treasury volumes through DTCC’s Fixed Income Clearing Corporation (FICC) are expected to rise by over US$4 Trillion once the SEC’s expanded U.S. Treasury clearing rules take effect, according to new industry feedback.
The new estimate, up from the original estimate of approximately US$1.63 Trillion in September 2023, was recently determined based upon a survey completed by 83 sell-side institutions following the final SEC’s U.S. Treasury clearing rule.
30% of sell-side plans to facilitate cleared U.S. Treasury activity
One area that continues to be discussed across the industry as a result of the new SEC rules is the treatment of “done-away” activity, which is a type of U.S. Treasury activity executed by a client with one counterparty but cleared by a firm different from the executing counterparty.
Almost 30% of sell-side institutions responded in the survey that they plan to facilitate cleared U.S. Treasury activity out of either their Prime Brokerage, Agency Clearing or Futures Commission Merchant business lines, all of which traditionally offer “done-away” execution as part of their core client clearing services.
In support of the expanded Treasury clearing rules, DTCC will continue to work closely with market participants across the industry, as well as organizations like SIFMA, to ensure appropriate access to central clearing for all market participant segments and facilitate a streamlined implementation.
Buy-side concerned with “done-away” activity
Brian Steele, DTCC Managing Director, President, Clearing & Securities Services, said: “Given the SEC’s rules around mandatory central clearing are now final and the industry’s understanding of their impact is becoming clearer, it is not surprising to us to see the incremental volume estimates hardening around US$4 Trillion daily. While expanding Treasury clearing will be an important structural change for all Treasury market participants, we view it as a logical expansion of the services we provide and consistent with FICC’s mission. We currently process roughly US$7 Trillion in Treasury activity every day and our buy-side volumes in the Sponsored Service are up over 70% year-over-year. We expect these growth trends to steadily continue as we move toward go-live for the expanded Treasury Clearing requirement.”
Laura Klimpel, Managing Director, Head of DTCC’s Fixed Income and Financing Solutions, added: “There has been much discussion around done-away activity in connection with Treasury Clearing, with many buy-side firms concerned that client clearing services would only be offered by sell-side firms’ repo desk businesses, without done-away capabilities. What we are seeing now from the survey data is an emerging sell-side trend to address this challenge, with firms now looking to also leverage their Prime Brokerage, Agency Clearing, and FCM businesses to clear clients’ Treasury transactions.”
Rob Toomey, Managing Director and Associate General Counsel and Head of SIFMA’s Capital Markets Group, added: “SIFMA continues to work with market participants—both buy and sell side—to identify and resolve issues and challenges in connection with ‘done away’ clearing. We expect these efforts to feed into our overall clearing documentation efforts and to allow market participants to choose the right approach for their business.”
