The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, today issued a white paper, “The U.S. Treasury Clearing Mandate: An Industry Pulse Check,” to further enhance the industry’s knowledge of the U.S. Securities & Exchange Commission’s (SEC) expanded clearing rules. The paper, which reports on findings from a recent industry survey conducted by DTCC’s Fixed Income Clearing Corporation (FICC) subsidiary, provides updated estimates on the volume of transactions required to be submitted for central clearing, the planned usage of FICC’s various access models, and how margin and liquidity risk management resources may be impacted.

“FICC stands at the center of a momentous transformation of market structure,” said Brian Steele, DTCC Managing Director, President, Clearing & Securities Services. “FICC continues to regularly survey the industry in order to provide new estimates on the impact of the rule. This most recent survey demonstrates that the industry’s level of understanding and preparedness for expanded clearing has significantly improved since we conducted our survey in 2023, as evidenced by further refinements to volume, liquidity and margin impacts.”

Specifically, new findings confirm:

• Volumes: Treasury clearing activity is expected to increase by more than $4TN each day, bringing the total activity to over $11.5TN in daily volume. 58% of respondents forecasted that the additional clearing activity will be driven by indirect participant Repo activity clearing.
• Access Models: FICC’s Sponsored Service continues to be the preferred access model for indirect participant activity (74% of respondents), however, survey respondents showed increased interest in the Agent Clearing Member (ACM) Service (43%). FICC expects to set up 7,000+ new intermediary-indirect participant relationships.
• Done-Away Clearing: FICC anticipates growing adoption of a done-away clearing model for indirect participants. 28% of respondents say they expect to facilitate Treasury clearing activity through a business area that offers done-away execution.
• Margin: Margin is expected to increase but is anticipated to be proportionate to the additional volume of activity. Treasury Repo and Buy/Sell activity estimates indicate an increase in aggregate margin (VaR) for the respondents’ portfolios of approximately $58.4BN, with approximately $27BN (or 46%) of the aggregate incremental VaR representing segregated indirect participant margin. The results underscore FICC’s current efforts to provide margin efficiency through expanded end-user customer cross-margining opportunities. 
• Liquidity: Survey results indicate a potential maximum daily liquidity need of US$84.5B, which would point to a total Capped Contingency Liquidity Facility (CCLF) size of US$109.9B under current parameters and the outlined assumptions. Since 2021, the CCLF facility has ranged between $71.0BN and $128.4BN.  FICC will leverage these responses in its efforts to further diversify additional, cost-effective liquidity resources.

“Providing updated and transparent information is critical in supporting firms as they get ready for expanded central clearing of Treasuries,” said Laura Klimpel, Managing Director, Head of DTCC’s Fixed Income and Financing Solutions. “We remain committed to guiding and informing our members and the broader industry about the impact of the SEC’s new requirements, to collaborating with market participants on continuously enhancing our offerings, and to supporting a smooth and orderly implementation.”