SEC extends clearing rule compliance deadlines
26 February 2025 US
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The US Securities and Exchange Commission (SEC) has extended the compliance dates and provided temporary exemption for a rule related to clearing of US Treasury securities.
The extension for Rule 17ad-22(e)(18)(iv)(A) and (B) under the Securities Exchange Act is to 31 December 2026 for eligible cash market transactions, and 30 June 2027 for eligible repo market transactions.
Under the rule, a covered clearing agency that provides CCP services for US Treasury securities must establish, implement, maintain, and enforce written policies and procedures designed to require every direct participant to submit all eligible secondary market transactions to which it is a counterparty for clearance and settlement.
The rule also requires a covered clearing agency to identify and monitor its direct participants’ submissions of transactions for clearing, including how the covered clearing agency would address a failure to submit transactions.
Additionally, the SEC temporarily exempted covered clearing agencies from Exchange Act Rule 17ad-22(e)(6)(i), which requires them to separate margin for a direct participant’s proprietary US Treasury positions from margin for indirect participants using the direct participant’s services.
Under this temporary exemption, a US Treasury securities-covered clearing agency is not required to enforce its written policies and procedures regarding the rule until 30 September 2025, instead of the original 31 March 2025 compliance date.
Mark Uyeda, acting chairman of the SEC, says: “This one-year extension provides additional time to implement and validate operational changes.
“Direct participants will also have more time to implement important risk management changes to comply with US Treasury-covered clearing agency rules. The commission stands ready to engage with market participants on issues associated with implementation.”
If a direct participant of a US Treasury-covered clearing agency offers certain access models or segregated margin accounts, the covered clearing agency would be obligated to enforce those rules regarding such models or accounts against the relevant participant, and the direct participant must comply with those rules.
Following the announcement, trade association ISLA Americas comments: “The ISLA Americas community continues to engage with market participants, regulators, and industry stakeholders on these developments.
“We encourage discussions on how these changes will impact securities lending and broader market structure.”
The extension for Rule 17ad-22(e)(18)(iv)(A) and (B) under the Securities Exchange Act is to 31 December 2026 for eligible cash market transactions, and 30 June 2027 for eligible repo market transactions.
Under the rule, a covered clearing agency that provides CCP services for US Treasury securities must establish, implement, maintain, and enforce written policies and procedures designed to require every direct participant to submit all eligible secondary market transactions to which it is a counterparty for clearance and settlement.
The rule also requires a covered clearing agency to identify and monitor its direct participants’ submissions of transactions for clearing, including how the covered clearing agency would address a failure to submit transactions.
Additionally, the SEC temporarily exempted covered clearing agencies from Exchange Act Rule 17ad-22(e)(6)(i), which requires them to separate margin for a direct participant’s proprietary US Treasury positions from margin for indirect participants using the direct participant’s services.
Under this temporary exemption, a US Treasury securities-covered clearing agency is not required to enforce its written policies and procedures regarding the rule until 30 September 2025, instead of the original 31 March 2025 compliance date.
Mark Uyeda, acting chairman of the SEC, says: “This one-year extension provides additional time to implement and validate operational changes.
“Direct participants will also have more time to implement important risk management changes to comply with US Treasury-covered clearing agency rules. The commission stands ready to engage with market participants on issues associated with implementation.”
If a direct participant of a US Treasury-covered clearing agency offers certain access models or segregated margin accounts, the covered clearing agency would be obligated to enforce those rules regarding such models or accounts against the relevant participant, and the direct participant must comply with those rules.
Following the announcement, trade association ISLA Americas comments: “The ISLA Americas community continues to engage with market participants, regulators, and industry stakeholders on these developments.
“We encourage discussions on how these changes will impact securities lending and broader market structure.”
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