ANALYSIS: ICE, CME to launch testing ahead of Treasury clearing launches in 2025

The two exchanges are preparing to calibrate their platforms to compete with the dominant Depository, Trust & Clearing Corporation’s FICC offering, and are on track to go live with their services by the end of this year. That will put them in a position to benefit from the implementation of US mandatory clearing rules for the cash market that go live in December 2026, and ahead of the repo rollout slated for the middle of 2027.

Speaking to FOW on the sidelines of the International Swaps and Derivatives Association annual general meeting in Amsterdam, ICE Clear Credit’s chief commercial officer confirmed that the exchange is gearing up for testing next month.

“We’re targeting testing in June, aiming to be fully operational for a cash Treasury launch later this year—pending required regulatory approval,” Paul Hamill (pictured) said in an interview. “This is a complex undertaking. For example, executing a single trade involves coordination across a trading venue, middleware, clearing brokers, a clearing house, ICE Link, and Bank of New York for settlement and reporting.

“Most of the infrastructure is in place; now it's about testing and ensuring all parties understand the workflow.”

Hamill told FOW in October that ICE believes “done-away” clearing within its upcoming US Treasury clearing service will provide competition that will be welcomed by clients and regulators as it prepared its application to the Security and Exchange Commission. Hamill believes the Atlanta-based exchange’s experience building swaps clearing, with analytics services like ICE Link to support trade allocation, calculate margin or port trades between clearing intermediaries.

“In parallel, we’re actively engaging with clients and banks to demonstrate how the solution works in practice,” he added. “The encouraging part is strong interest in a swaps-style model—something familiar to both buy- and sell-side participants, many of whom helped shape the initial design to ensure it aligns with their operational and risk management needs.

“A key advantage of our model is the immediate novation of counterparty risk to the clearing house. This was instrumental in the growth and resilience of the swaps market post-clearing mandate, and it could similarly transform the cash Treasury space by eliminating bilateral credit risk and reducing operational and documentation burdens. Our existing technology is ready to be deployed and deliver those same benefits.”

The managing director for post trade and clearings at CME Group, on a panel earlier in the day confirmed that CME would also have a similar timeline for its service.

“We have been quite busy trying to build out our new clearing house to support cash cleared Treasury and repo,” Udesh Jha said at the event. “Our target is to go live by the end of this year, but in the next few weeks we will be opening up our systems for operational and other testing aspects.”

'Done-away' clearing is common in other markets but not US Treasuries. Trades executed with a counterparty can be cleared separately through an intermediary at a dealer or Futures Commission Merchant (FCM). How that works is central to how the competing service providers are positioning themselves.

“One of the key differentiators of the CME solution is that we are going to settle directly with the end clients,” Jha added. “One of the reasons why we chose to go this route was [to minimise] the amount of trade notional that goes on the balance sheet of clearing members… that is much more relevant in the context of done-away clearing.

“It is also important to have a margining regime that is both efficient as well as prudent. So we have been working on rolling out a value-at-risk (VaR)-based methodology.”

BNY, which offers settlement services for all three firms looking to refine their clearing services, has been working with the firms to enable innovation through its platform.

“We are doing some innovation with both CME and ICE, they will be participants and members of our platform as well so we are customising our settlement solutions for each of them to the extent that they need that so we can ensure that we can settle their cleared transactions just like we would for FICC,” John Morik, managing director and product and strategy lead at BNY said on the panel.

“For done-away clearing… we are putting some indicators on our transactions for all parties involved to show that you might have a clearing agent that you clear with, but that it might be executed that trade with a different party. We will ensure that we can provide reporting to those parties to indicate that this is a done-away transaction which is very different than today.”

CME manages the largest Treasury futures and options market, which is 10% larger than underlying cash in terms of notional. Speaking to FOW last week, the exchange’s global head of rates and over-the-counter products said the firm was on track for a fifth consecutive record year.

Last year saw a notional daily average of $774 billion (£579bn) in US Treasury futures trading, which was 109% larger than the cash market. The exchange’s 10-year US Treasury Note future saw volume rise 19% year-on-year to 591.7 million contracts in 2024, according to FOW data.