U.S. Treasury Central Clearing: what you need to know

The U.S. Securities and Exchange Commission (SEC) has finalized new regulations that will fundamentally reshape how U.S. capital markets operate. 

The SEC’s mandate is compulsory, but financial services firms have a chance to go further than mere compliance. Those who use the regulation as a springboard stand to realize significant advantages – sharpening their competitive edge, driving value creation, and reducing risk in a turbulent market. 

Here are the most important things you need to know to make the most of this opportunity. 

What is changing with U.S. Treasury clearing?

The SEC ruling on Treasury clearing significantly increases the proportion of cash and repurchase (repo) transactions that must be submitted to clearing by a Covered Clearing Agency (CCA) – currently, that’s the Fixed Income Clearing Corporation (FICC). This could mean a potential $4 trillion increase in daily transactions going through central clearing.¹ This is a big change from today’s market, where roughly 80% of secondary market transactions are settled bilaterally, outside of central clearing.

Why has the SEC made this ruling on central clearing?

The new rules aim to make U.S. capital markets more resilient – a goal that’s become increasingly urgent in light of recent market volatility. Bilateral settlement directly exposes firms to their counterparties. It means that the entire Treasury market is more susceptible to counterparty credit and systemic risks in the event of a default.

Central clearing of transactions is intended to increase visibility into clearing and settlement flows, while strengthening transaction security and liquidity. This will be particularly valuable in stress scenarios, with the confidence inspired by the CCA(s) leading to the market remaining more liquid than in a bilateral model.

Complying with the SEC’s mandate also gives financial institutions an opportunity to strategically transform important elements of their operations, liquidity and capital, and risk management. In addition to reducing risk and improving resilience, organizations have a chance to simplify and strengthen operational processes, realize significant cost savings, and tap into new sources of value.

Have there been any updates since the rule was first published?

On February 25, 2025, the SEC announced a 12-month extension to compliance dates for the Treasury clearing mandate. The extension is aimed at providing “additional time for further engagement on compliance, operational, and interpretive questions” and supporting a smoother transition to central clearing.

Compliance remains critical as it drives cost and process efficiency and opportunities for value creation. Firms should welcome this extra time to reprioritize their efforts and ensure they’re fully ready for the new rules.

What are the key Treasury clearing deadlines?

Even with the SEC granting a one-year reprieve, firms still face a rapid implementation timeline and should act now. 

At the time of writing, the first deadline for Treasury central clearing compliance arrives on September 30, 2025, when FICC must implement its revised policies, procedures, and access models and direct participants must separate their proprietary transactions from those of their customers (including affiliates). Participants must submit eligible cash transactions to central clearing by December 31, 2026, and eligible repo transactions by June 30, 2027.

What trades are impacted by the SEC’s final rule?

The new rules mandate central clearing for virtually all cash and repo transactions, including:

• Repos and reverse repos where one of the counterparties is a direct participant of the CCA
• Purchases and sales entered by a member of the clearing agency acting as an interdealer broker
• Purchases and sales entered by a member of the clearing agency and a broker-dealer, government securities broker, or a government securities dealer.

What does central clearing mean for your firm?

While the rule applies cross-border to all market participants, the biggest impacts will be felt by direct participants – that is, banks and broker-dealers with a direct clearing membership at FICC (or potentially other CCPs in the future). Direct participants may need to establish new relationships with CCPs, renegotiate bilateral client agreements, and adapt their trading strategy and infrastructure.

To get ready for U.S. Treasury central clearing compliance, Baringa recommends focusing on three key areas:

1. Margin segregation. Start modelling the cost/benefit of the available options (segregated and non-segregated margin with or without sponsorship, or hybrid approaches) and consider the impact on balance sheet, capital, liquidity, and operations.
2. Risk management. Adapt risk management practices to accommodate increased liquidity needs due to changes in margin requirements, operational risks related to changes in trading and funding flows, and potential concentration risk when clearing all eligible transactions through a single CCA (FICC), among others.
3. Clearing of cash and repo transactions. Identify which transactions fall within the SEC ruling's scope; establish a commercial model and process for onboarding indirect participants; define the end-to-end transaction lifecycle; and move eligible trades through central clearing ahead of the deadline. 

Need help preparing for Treasury central clearing?

Meeting the SEC’s mandate for central clearing isn’t optional. But firms have an opportunity to go beyond compliance to strengthen their organizations, especially now that the implementation timeline has been extended. Complying early enables banks and broker dealers to sharpen their competitive edge and strengthen resilience in a turbulent market. The recent uptick in central clearing in anticipation of the original timeline demonstrates that firms are already beginning the transformation process. 

By teaming up with an experienced partner like Baringa, organizations can lay the foundations for long-term resilience, business value, and competitive differentiation.  

At Baringa, we bring deep expertise in capital and liquidity management to help organizations navigate complex balance sheet and funding impacts. We’ve developed a unique organization-wide approach to address the far-reaching, interconnected impacts of central clearing. Working side-by-side with your teams, we ensure your entire business is equipped with the tools, techniques, and technologies it needs to achieve compliance and unlock value from the changes.

To learn more about how Baringa can help you navigate the challenges and opportunities arising from U.S. Treasury central clearing, reach out to a member of our Finance Risk and Compliance Team below or download our guide to getting ahead: From compliance to competitive advantage: Harnessing U.S. Treasury central clearing to accelerate post trade transformation. 

¹ DTCC, The FICC estimates that daily Treasury Clearing activity is expected to increase by more than $4TN