My Crypto Lawyer Sec Speeches Cryptocurrency Update on the SEC’s Work Toward Treasury Clearing Implementation

The Commission has taken important steps in the ongoing work to support the orderly and successful implementation of the Treasury Clearing Rule.[1] First, the Commission published for public comment a request for exemptive relief submitted by the Securities Industry and Financial Markets Association (“SIFMA”), which requests targeted modifications to the inter‑affiliate exemption contained in the Treasury Clearing Rule.[2] Second, the Commission reopened the comment period on the requested exemptive relief submitted earlier this year by the Institute of International Bankers (“IIB”), which addresses the extraterritorial application of the Trade Submission Requirement.[3]

Since being asked to oversee the Commission’s efforts to implement the Treasury Clearing Rule, I have emphasized the importance of transparency, collaboration, and methodical progress. The U.S. Treasury market—at nearly $29 trillion outstanding[4]—is the deepest and most liquid government securities market in the world, and the Commission must implement the clearing mandate in a way that preserves market functioning while enhancing resilience. To that end, we have engaged extensively with market participants as well as foreign and domestic regulators, and we have sought input from market participants to preemptively address questions that affect implementation. Our engagement on these exemptive requests continues that approach.

Requested Exemptive Relief for Inter-Affiliate Transactions

SIFMA’s request for exemptive relief would have the effect of expanding the set of affiliates eligible to rely on the inter‑affiliate exemption and introduce a tailored activity‑based threshold for certain non‑U.S. affiliate transactions. As stated in SIFMA’s request, many institutions depend on inter‑affiliate repo activity for internal liquidity, treasury, and collateral management—especially across time zones where covered clearing agencies do not operate on a 24‑hour basis. These are real‑world challenges that firms face as they prepare for the upcoming compliance dates. At the same time, the Treasury Clearing Rule aims to ensure that inter‑affiliate flows do not become a backdoor to avoid clearing transactions that would otherwise be required to be submitted.

We welcome comments on the notice and any data relevant to the potential effects of the requested relief on liquidity and competition, to help the Commission better understand the potential effects if such relief were to be granted.

Reopening the Comment Period on Requested Exemptive Relief for Extraterritorial Transactions

The Commission also reopened the comment period on the notice of IIB’s request for relief, which concerns transactions executed entirely outside the United States between non‑U.S. institutions. Market participants and foreign regulators have raised significant questions about the extraterritorial scope of the clearing mandate. Many non‑U.S. financial institutions operate through a mix of U.S. and non‑U.S. branches and affiliates, and applying the Trade Submission Requirement to transactions occurring wholly overseas can pose operational challenges, create legal uncertainty regarding enforceability of netting arrangements, and raise practical issues given time‑zone differences and the absence of 24‑hour clearing.

Because both SIFMA’s and IIB’s requests for relief may intersect in important ways—including competitive, operational, and structural considerations—it is appropriate to solicit further public input. We encourage commenters to address not only each request individually but also how the potential exemptions may, together, affect the overall environment for liquidity and competition in Treasury transactions and the core purposes of the Treasury Clearing Rule.

Work Completed to Date and Work Ahead

These actions build on meaningful progress achieved over the past year. For example, the Commission approved rule changes and conditional exemptive relief to support customer cross-margining of cash market positions in U.S. Treasury securities cleared by a registered clearing agency and futures positions in U.S. Treasury securities cleared by a registered derivatives clearing organization.[5] This important development may help reduce margin requirements for market participants and improve capital efficiency across related cash and futures Treasury positions. The Commission has also approved new clearing agencies for Treasury securities[6] and approved several proposed rule changes from the Fixed Income Clearing Corporation (“FICC”) to broaden client access to clearing.[7]

At the same time, significant work remains. Commission staff continue to assess issues related to the treatment of failed trades and clearing agency outages as well as customer protection considerations—issues that market participants have repeatedly identified as critical to their preparations.

Public Feedback is Critical

The Commission remains committed to working collaboratively with all market participants to ensure the U.S. Treasury market remains the deepest, most liquid, and most resilient government securities market in the world.[8] The success of the Treasury Clearing Rule implementation depends not only on the Commission’s actions but also on constructive engagement from market participants. I strongly encourage commenters to provide data‑driven, practical feedback on both exemptive requests. Any exemptive relief the Commission grants should work for all parties—addressing legitimate operational challenges while continuing to advance the purposes of the Treasury Clearing Rule.

Please see the SEC’s dedicated Treasury Clearing implementation webpage, which will be updated regularly as we address additional issues and provide further guidance, for more information.