ANALYSIS: DTCC, CME discuss US Treasuries clearing preparations

Speaking on a panel at the International Swaps and Derivatives Association event on Tuesday chaired by Ulrich Karl, head of clearing services at ISDA, senior figures from CME Group and the DTCC discussed their respective firms’ preparations.

The Securities and Exchange Commission (SEC) plans to mandate from the end of 2026 the clearing of US Treasury bonds, followed by the clearing of US Treasury repo by June 2027.

DTCC runs the incumbent Treasuries clearing service, the Fixed Income Clearing Corporation (FICC), which is planning additional services to leverage its head-start. CME Group, which operates the largest US Treasury futures markets, and Intercontinental Exchange, which controls US credit default swaps clearing, are also planning to enter this space.

Laura Klimpel, managing director and head of DTCC's Fixed Income and Financing Solutions, told the delegation: “For the remainder of 2025, we’re prioritising four product launches which are all targeted before year-end subject to regulatory approval. Three are our tri-party repo product enhancements so we’re going to be offering a collateral in lieu version of our Sponsored GC service.”

Klimpel said the new service gives the FICC a lean over the purchased securities held in the cash investor’s tri-party account which will mitigate the need for the intermediary to post margin on behalf of the cash investor, ensuring the central counterparty (CCP) can foreclose on the client in the event of default.

She continued: “We are offering a "done-with" and a "done-away" version of collateral which are going to be important. We are also rolling out a tri-party version of our agent clearing service. Today, our agent clearing service does process repo but only deliverable repo. We are adding a tri-party capability which we think is going to be extremely popular, particularly for market participants looking to intermediate match-book activity through the CCP.”

Klimpel also mentioned the cross-margining service the DTCC has with CME Group which currently allows members of both clearing houses to cross-margin the futures in CME against the cash Treasuries in FICC.

“We have a long-standing cross-margining arrangement with the CME but today it is only limited to direct members of both of our clearing houses.” The partners have applied to the US regulator for approval to extend the offering to end-clients, a move that will “unlock critical benefits that are really necessary for market participants as they start having to bring their cash and repo activity into the CCP”.

The DTCC MD said this service “is slated to go live before the end of this year”.

While working in partnership with DTCC, CME Group is also preparing its proprietary US Treasuries clearing service, as described by Agha Mirza, global head of rates and OTC products at the US group.

Mirza told the delegation in London: “We have heard our clients and clearing members express the need for an additional central counterparty which will help to enhance capacity and operational resilience.”

The consensus is the US Treasuries market is sufficiently large and diverse to support more than one clearing house.

Mirza continued: “We have led the work on our offering with “done-away” in mind. The key differentiator is that clients will settle their Treasury and repo trades with the clearing house, which will in turn help clearing members to avoid taking a principle on their balance sheet account so it follows that participants will be able to execute and access clearing though potentially different entities, which is the definition of “done-away” trading.”

The US Treasuries market largely deploys the “done-with” model where one firm trades and clears for a client whereas the US Treasury clearing mandate is expected to support the emergence of the “done-away” model where different firms execute and clear.

This model is the norm in US futures and should open up the vast US domestic government debt market to increased competition.

Mirza said: “CME Group continues to engage with the SEC on our application and the current review period for the Commission to make a decision ends in October. In the meantime, we continue with the operational build, operational testing is available now and more will be coming over the next weeks.”

Also speaking on the panel, Stephen Berger, managing director, Government and Regulatory Policy at Citadel, said the sheer size and rapid growth of the US Treasuries market makes it vitally important on the global stage.

Berger told the delegation: “The market is growing at a staggering rate. The outstanding Federal debt is up to $28tn (£20tn), four-times what it was at the time of the financial crisis, and, based on the latest Congressional budget office forecasts, it will grow to $52tn by 2035.”

The Citadel MD went on to welcome the prospect of competitive clearing house offerings: “Those figures are staggering and underpin why we need the plumbing of this market to continue to support efficiency, resiliency and liquidity. In that regard, we welcome the choice of competition among CCPs.

“We have three world-class competitors. One who already has a leading position in the market and two that excel in other and at time closely correlated asset classes,” Berger added.

Speaking earlier at the conference on Tuesday, the chief executive of the trade association said there are three important changes that need to take place to ensure banks can fully support the US Treasuries clearing regulation.