The U.S. Securities and Exchange Commission (the “SEC”) adopted the U.S. Treasury Clearing Rule in December 2023 (the “Final Rule”). The mandate represents a fundamental structural change to the world’s largest and most liquid government securities market, requiring the clearing and settlement of U.S. Treasury cash and repurchase (repo) transactions. The objective of the Final Rule is to reduce counterparty and systemic risk and increase market transparency.

Following extensive industry feedback, in January 2025 the SEC approved a one-year extension to the deadline, moving the compliance date for eligible cash transactions to December 31, 2026, and for eligible repo transactions to June 30, 2027. This adjustment reflects the scale of operational change required across broker dealers, custodians and buyside participants, as well as the need to align operational systems, collateral frameworks and legal agreements with central clearing counterparty (“CCP”) processes.

Once the operational set up has been complete, the market will turn its focus to the documentation phase of the project and that will be no small task. The scope promises to be almost as wide as some of the later phases we have seen for Initial Margin. Whilst the Done-With documentation has been published, the Done-Away templates are still to be released. We are aware of certain custodian bank using their
own models with their respective bespoke documentation. Finally, we are waiting to see what models will be offered and what documentation will be needed for any new CCPs that get approved by the SEC.