SEC Adopts Treasury Clearing Rules

On December 13, 2023, the Securities and Exchange Commission ("SEC") adopted new rules that will have the effect of requiring central clearing of a broad range of cash transactions and repurchase transactions in U.S. treasury securities ("U.S. Treasuries").¹ The new rules will require covered clearing agencies ("CCAs")² to adopt policies and procedures requiring their direct participants to clear all "eligible secondary market transactions" in U.S. Treasuries. Almost all repurchase and reverse repurchase transactions in U.S. Treasuries (collectively "repos") entered into by funds or institutional investors are done with direct participants of a CCA resulting in most repos being submitted to the CCA for clearing. Among other changes, the new rules also require a CCA to hold margin for its direct participants' proprietary trades separate from margin for customer transactions.³ The SEC has stated that the new rules are intended to increase the safety and efficiency of