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DTCC’s FICC Treasury clearing activity to increase by over $4tn daily

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Post-trade market infrastructure specialist DTCC is expecting daily Treasury volumes through its Fixed Income Clearing Corporation to rise by over $4tn once the SEC’s expanded US Treasury clearing rules take effect.

The new estimate, up from the original estimate of approximately $1.63tn in September 2023, is based on a survey completed by 83 sell-side institutions following the final SEC’s US Treasury clearing rule.

“Given the SEC’s rules around mandatory central clearing are now final and the industry’s understanding of their impact is becoming clearer, it is not surprising to us to see the incremental volume estimates hardening around $4tn daily,” stated Brian Steele, DTCC Managing Director, President, Clearing & Securities Services. “While expanding Treasury clearing will be an important structural change for all Treasury market participants, we view it as a logical expansion of the services we provide and consistent with FICC’s mission.

“We currently process roughly $7tn in Treasury activity every day and our buy-side volumes in the Sponsored Service are up over 70% year-over-year. We expect these growth trends to steadily continue as we move toward go-live for the expanded Treasury Clearing requirement.”

One area that continues to be discussed across the industry as a result of the new SEC rules is the treatment of “done-away” activity, which is a type of US Treasury activity executed by a client with one counterparty but cleared by a firm different from the executing counterparty. Almost 30% of sell-side institutions responded in the survey that they plan to facilitate cleared US Treasury activity out of either their Prime Brokerage, Agency Clearing or Futures Commission Merchant business lines, all of which traditionally offer “done-away” execution as part of their core client clearing services.

“There has been much discussion around done-away activity in connection with Treasury Clearing, with many buy-side firms concerned that client clearing services would only be offered by sell-side firms’ repo desk businesses, without done-away capabilities,” said Laura Klimpel, Managing Director, Head of DTCC’s Fixed Income and Financing Solutions. “What we are seeing now from the survey data is an emerging sell-side trend to address this challenge, with firms now looking to also leverage their Prime Brokerage, Agency Clearing and FCM businesses to clear clients’ Treasury transactions.”

In support of the expanded Treasury clearing rules, DTCC will continue to work closely with market participants across the industry, as well as organisations like SIFMA, to ensure appropriate access to central clearing for all market participant segments and facilitate a streamlined implementation.

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