Serving as a Strategic Partner in the Move to US Treasury Clearing

I recently attended FIA Boca where much of the conversation focused on the impact of technology, regulation and other dynamics on global markets and the future of market structure. Not surprisingly, the topic of US Treasury Clearing was one of the hot topics, especially as firms continue to analyze the SEC’s rule and assess the impact it will have on their business as well as that of their clients.

As a long-time proponent of central clearing, we view the Treasury Clearing requirement as a logical expansion of the services that our subsidiary, Fixed Income Clearing Corporation (FICC), has provided to the Treasury market for nearly 40 years. In fact, it’s consistent with our mission to protect the stability of the financial system.

Over the past four decades, FICC has earned a strong reputation for consistently introducing client-driven innovations to support the industry – from launching multiple access models like our successful Sponsored membership for the buy-side to delivering enhanced cross-margining with CME. These initiatives have further mitigated risk, optimized collateral usage, reduced capital requirements and enhanced overall market efficiency.

It's for these and other reasons that voluntary US Treasury central clearing has experienced strong growth. In 2023, overall volumes, including buy-side activity increased significantly, along with the daily average value of transactions ?– a testament to the value central clearing delivers to market participants. Because we expect these trends to continue as we move toward go-live of the Treasury Clearing requirement, we’ll be testing our throughput and resilience to ensure continued seamless execution.

In the coming month, we’ll also continue to engage with the industry to share how we’re providing more customized approaches for firms to comply with the Treasury Clearing requirement, including offering a range of flexible clearing models for market participants to access FICC in the way that best meets their business and regulatory needs.

A point of pride for us is that, as an industry-owned organization, we continue to expand our community of users beyond our traditional dealer and bank members. In 2023, the number of FICC Sponsored Members also jumped significantly. Today, we serve a very diverse and wide array of asset managers of different profiles and regulatory statuses, and as we look to the future, we’ll continue to innovate and respond to feedback from the market to support the industry’s move to central clearing.

As part of this, we’re committed to enhancing our cross-margining agreement with CME as well as exploring opportunities to extend the benefits of cross-margining to customer accounts and eventually other products. We know this is important to the industry because it will maximize liquidity and efficiency while maintaining robust risk management.

During this period of market transformation, we’re fully engaged on these issues, we’re here to work collaboratively with all our stakeholders, and we pledge to continue serving as a strategic partner to ensure a smooth transition to US Treasury Clearing.

#finserv #FIABoca #USTC