The Securities and Exchange Commission today offers a set of new rules for clearing agencies that provide central counterparty services for US Treasury securities aimed, among other things, at improving risk management.
Clearing agencies covered by the rules would be required to have policies and procedures in place to require direct participants to submit for clearing all eligible transactions in the US Treasury secondary market. These transactions include repurchase and reverse repurchase agreements collateralized by U.S. Treasury securities to which a direct participant is a counterparty, as well as all purchase and sale transactions of U.S. Treasury securities for direct participants that act as intermediary brokers. They also include all purchases and sales of US Treasury securities between a direct participant and a registered broker, government securities dealer, or government securities dealer; a hedge fund; and a leveraged account.
The proposal would also require covered clearing houses to have policies and procedures for calculating, collecting and holding margin for a direct participant’s proprietary positions in U.S. Treasury securities separately from the margin deposited by that participant under transactions in US Treasury securities by an indirect participant. This would further require a covered clearing house to have policies and procedures in place to ensure that it has appropriate means to facilitate access to clearing and settlement services for all eligible secondary market transactions in securities of the US Treasury, including those of indirect participants. Comments on the proposal are due 60 days after publication in the Federal Register.