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The SEC’s U.S. Treasury Central Clearing Final Rule

Ahead of the implementation, here is what you need to know about the upcoming changes – and how Northern Trust is preparing.

 

Executive Summary

The SEC's Treasury clearing rule reshapes how cash and repo Treasury transactions settle. Cash trades must clear by 31 December 2026; repo by 30 June 2027. Northern Trust supports clients through its FICC-sponsored repo offering and is evaluating broader clearing capabilities. Clients should be assessing access models, margin arrangements, and documentation now.

Final Rule

On December 13, 2023, the U.S. Securities and Exchange Commission (SEC) adopted a Final Rule that makes it mandatory for Fixed Income Clearing Corporation (FICC) members to clear U.S. Treasury securities with nearly all repo and reverse repo trades involving U.S. Treasuries and a limited sub-set of buys and sells transactions. The final rule, “Standards for Covered Clearing Agencies for U.S. Treasury Securities and Application of the Broker-Dealer Customer Protection Rule with Respect to U.S. Treasury Securities,” impacts global counterparties  buying, selling or repurchasing in scope U.S. Treasuries, against a counterparty that is a FICC netting member. The SEC noted in its rule release that a central clearing model will help to increase transparency, lower counterparty risks, and enhance market stability.

Implementation Deadlines1:

On February 25, 2025, the SEC announced an extension of the compliance dates stating: “The U.S. Treasury market is a critical piece of the global financial system.  New rules must be implemented properly, and any operational issues must be addressed.”

  • March 31, 2025 extended to September 30, 2025: Covered clearing agencies2 (CCAs) required to implement enhanced practices, including risk management, margin, and customer asset protection.
  • December 31, 2025 extended to December 31, 2026: Direct participants of CCAs required to clear ins-scope cash secondary market transactions
  • June 30, 2026 extended to June 30, 2027: Direct participants of CCAs required to clear in scope Treasury repo transactions.

The new rule covers eligible secondary market transactions (ESMTs), including outright purchases, sales, repos, and reverse repos, where at least one party is a CCA netting member, such as a FICC netting member. The requirements have extraterritorial impact as anyone executing against an in-scope counterparty may be captured.

There are exemptions to this rule, as included below:

  • Any purchase or sale transactions or repo or reverse repo transactions between CCA direct participant and a central bank, a sovereign entity, an international financial institution, state government, local government, or a natural person.
  • Any repo or reverse repo transactions in which one counterparty is a CCA providing central counterparty services or a derivative clearing organization or is regulated as a central counterparty in its home jurisdiction.
  • Any repo and reverse repo transactions between direct participant and an affiliated counterparty3, provided that the affiliated counterparty submit for clearance and settlement all other repurchase or reverse repurchase agreements collateralized by U.S. Treasury securities to which the affiliate is a party.

FICC was historically the only CCA for Treasuries and is a subsidiary of the Depository Trust & Clearing Corporation (DTCC).  CME Securities Clearing, Inc. and ICE Clear Credit LLC are now SEC approved CCAs as of December 2025 and February 2026 respectively. ICE Clear Credit LLC’s service is currently live for cash transactions, with repo clearing planned for late 2026.

Background

The U.S. Treasury market is valued at around $29 trillion4 USD, making it the world’s deepest and most liquid market. Heightened market volatility in this asset class, such as experienced during the COVID-19 “dash for cash” period, accelerated regulatory action to find ways to increase market resilience. Historically, 70–80% of repo and cash trades were uncleared5, creating vulnerabilities during market stress. Central clearing mitigates counterparty risk, supports orderly default management, and strengthens operational efficiency.

How can Northern Trust help you navigate the new regulation?

Since 2021, Northern Trust has offered a program to sponsor repurchase transactions into FICC clearing. As a member of FICC, Northern Trust has the expertise to help  meet the new regulation through our Sponsored DVP Service for Repo “Done-With”. 

Northern Trust’s FICC repo program currently sponsors various types of entities  domiciled in the U.S., Cayman Islands, and expanding to other jurisdictions. The types of entities sponsored include, but are not limited to, mutual funds, corporate cash, hedge funds, insurance accounts, and local government investment pools. Learn more at: FICC Sponsored Repo | Northern Trust.

While NT has been offering the existing Sponsored DVP “Done-With” model since 2021, FICC has developed additional access models in order to facilitate compliance with the UST mandatory clearing rules. As such, NT is currently standing up the Agent Clearing “Done With” and evaluating the Agent Clearing “Done-Away” access models in order to meet client demand.

Northern Trust does not anticipate changes to existing custody settlement instructions for U.S. Treasury cash or repo transactions. The rule applies at trade execution as a pre‑settlement requirement, and settlement processing is expected to continue in line with clients’ established instructions and standard practices.

About FICC clearing:

FICC provides direct and indirect membership options for both buy side and sell side market participants. These models offer flexibility, enabling participants to access central clearing to meet their own business objectives and to meet the regulatory requirements.

Direct Access Model:

  • Direct participation client types: Dealers, Banks, Interdealer Brokers, Government Securities Issuers, Trust Companies, Futures Commission Merchants, etc.
  • Membership types: Netting Member including Sponsoring Member and Agent Clearing Member

Indirect Access Model:

  • Indirect participation client types: Generally used by buy-side firms and various non-US Banking entities
  • Indirect Participant Types: Sponsored Member (client of the Direct Sponsoring Member), and Executing Firm Customer (client of the Direct Agent Clearing Member)

FICC-Sponsored Repo allows indirect membership to FICC to facilitate participation in the repo market through a sponsoring member who acts as an intermediary. This allows access to a deep pool of liquidity, such as U.S. cash or U.S. Treasuries, on a daily basis and participation in secure repo transactions without the need for direct membership in the clearing corporation, thereby reducing counterparty risk and increasing operational efficiency.

Following the implementation of the U.S. Treasury Clearing rule, FICC daily volume of centrally cleared sponsored repo is up to approximately $2.43 trillion6. The increased volume has enhanced the value of accessing the FICC repo market, which is expected to benefit both cash investors who appreciate the safety of the largest cleared repo market with a AAA rated CCA and holders of Treasuries who are looking to borrow cash.

What should you be doing?

To prepare for the upcoming changes, market participants should start reviewing their current operating models to identify areas that need changes to support the central clearing of U.S. Treasuries. Clients may also benefit from reviewing the rule and SIFMA report published on November 13 2024, ‘US Treasury Central Clearing: Industry Considerations Report.’  In addition, your organization may want to consider the following themes:

  • Clearing model: Understand the different access models (e.g. Sponsored Model or Agent Model7) and their applicability to your requirements.  
  • Legal Agreements: Clients should remain aware that new legal agreements may be necessary.
  • Operational changes: Perform operational flow impact analysis with consideration to changes from uncleared to cleared transactions.
  • Standard Settlement Instructions (SSIs): Consider custodian conversations for SSI updates where clients change prime broker/custodian settlement.
  • Repo & Custodian pairing: Consider leveraging same repo counterparty as custodian for straight-through-processing.

Northern Trust continues to assess the client impacts and change requirements. For more information, please contact your relationship manager, client service manager, or client service delivery manager. You can visit the U.S. Treasury Clearing | DTCC website for more information.

 

1 Implementation timelines postponement announcement by SEC on February 25, 2025: SEC.gov | SEC Extends Compliance Dates and Provides Temporary Exemption for Rule Related to Clearing of U.S. Treasury Securities

2 As of this writing, FICC , CME Securities Clearing, Inc., and ICE Clear Credit LLC are approved CCAs.

3 Affiliated counterparty is defined as Bank, Broker, Dealer or Futures commission which holds a majority ownership interest in either the direct participant or the direct participant holds a majority ownership interest in the counterparty, or a third party holds majority interest in both direct participant and the counterparty.

4 https://www.sifma.org/research/statistics/us-treasury-securities-statistics

5 https://www.sec.gov/newsroom/speeches-statements/uyeda-093025-update-treasury-clearing-implementation

6 https://www.dtcc.com/charts/membership

7 https://www.dtcc.com/ustclearing/access-central-clearing

 

Reference Materials

The information in these materials is not intended to be and should not be treated as legal, investment, accounting or tax advice. Readers, including professionals, should not rely upon this information as a substitute for their own research or impact assessment or for obtaining specific legal, accounting or tax advice from their own counsel. This material is directed to professional clients only and is not intended for retail clients. For Asia-Pacific markets, it is directed to expert, institutional, professional and wholesale investors only and should not be relied upon by retail clients or investors.