FACT SHEET

Improving Risk 

Management and 

Increasing Clearing 

in U.S. Treasuries

U.S. SECURITIES AND EXCHANGE COMMISSION PAGE 1 OF 2

Why This Matters

A clearing agency that serves as a central counterparty acts as the buyer to every seller 

and the seller to every buyer in a securities transaction. It can help increase the safety and 

efficiency of securities trading and reduce costs. A clearing agency also mitigates the 

potential for a single market participant’s failure to destabilize other market participants or 

the financial system. Central clearing also addresses concerns about counterparty risk by 

substituting the clearing agency’s liquidity and creditworthiness for each counterparty.

The U.S. Treasury market plays a unique role in the U.S. and global economy, as an 

investment instrument and hedging vehicle, a risk-free benchmark for other financial 

instruments, and a mechanism for the Federal Reserve’s monetary policy implementation. 

How the Rules Apply

The proposed amendments to Exchange Act Rule 17Ad-22 would impose requirements on 

covered clearing agencies providing central counterparty services for U.S. Treasury 

securities. First, a covered clearing agency would be required to have policies and 

procedures designed to require its direct participants to submit for clearing all eligible 

secondary market transactions.

The Securities and Exchange Commission proposed rule amendments that would: 

● Require covered clearing agencies that provide central counterparty services for U.S. 

Treasury securities to have policies and procedures to require their direct participants to 

submit for clearing certain eligible secondary market transactions;

● Require that covered clearing agencies for U.S. Treasury securities have policies and 

procedures to calculate, collect, and hold margin for their direct participants’ proprietary 

transactions separately from transactions submitted on behalf of indirect participants;

● Require covered clearing agencies for U.S. Treasury securities to have policies and 

procedures to ensure that they have appropriate means to facilitate access to clearance 

and settlement services of all eligible secondary market transactions, including those of 

indirect participants; and

● Amend the broker-dealer customer protection rules to permit margin required and on 

deposit at a covered clearing agency for U.S. Treasury securities to be included as a 

debit item in the customer reserve formula, subject to certain conditions.
FACT SHEET | Improving Risk Management and Increasing Clearing in U.S. Treasuries

U.S. SECURITIES AND EXCHANGE COMMISSION Page 2 of 2

Eligible secondary market transactions would include:

• All repurchase and reverse repurchase agreements collateralized by U.S. Treasury 

securities to which a direct participant is a counterparty;

• All purchase and sale transactions of U.S. Treasury securities for direct participants 

who are acting as interdealer brokers. This occurs when the participant brings 

together multiple buyers and sellers using a trading facility and is a counterparty to 

both the buyer and seller in two separate transactions; and

● All purchases and sales of U.S. Treasury securities between a direct participant 

and a registered broker-dealer, government securities dealer, or government 

securities broker; a hedge fund; and a levered account.

Eligible secondary market transaction would not include purchase or sale transactions or 

repurchase or reverse repurchase agreements in which one counterparty is a central bank, 

a sovereign entity, an international financial institution, or a natural person. 

The proposal would also require covered clearing agencies to have policies and 

procedures to calculate, collect, and hold margin for a direct participant’s proprietary 

positions in U.S. Treasury securities separately from margin posted by that participant in 

connection with U.S. Treasury securities transactions by an indirect participant.

Further, the proposal would require a covered clearing agency to have policies and 

procedures to ensure that it has appropriate means to facilitate access to clearance and 

settlement services of all eligible secondary market transactions in U.S. Treasury 

securities, including those of indirect participants, and that those policies and procedures 

are reviewed by the covered clearing agency’s board of directors annually.

The proposal would amend the broker-dealer customer protection provisions in Exchange 

Act Rule 15c3-3a. Currently, Rules 15c3-3 and 15c3-3a do not permit broker-dealers to 

include a debit in the customer reserve formula equal to the amount of margin required and 

on deposit at a covered clearing agency for U.S. Treasury securities. Therefore, increases 

in the amount of margin required to be deposited at a covered clearing agency for U.S. 

Treasury securities as a result of the recommended additional membership standards 

would result in corresponding increases in the need to use broker-dealers’ cash and 

securities to meet these requirements.

The amendment to Rule 15c3-3a would permit margin required and on deposit at a 

covered clearing agency for U.S. Treasury securities to be included as a debit item in the 

customer reserve formula, subject to certain conditions designed to ensure maximum 

protection of a broker-dealer’s customers. This new debit item would offset credit items in 

the Rule 15c3-3a formula and, thereby, free up resources that could be used to meet the 

margin requirements of a covered clearing agency.

Additional Information:

The public comment period will remain open for 60 days following publication of the proposing release in the 

Federal Register.