The U.S. Treasury market is undergoing a government-wide reform effort to improve its function BY GOLIDLOCKS, 11 AUGUST

 GOLDILOCKS

The U.S. Treasury market is undergoing a government-wide reform effort to improve its function. These reforms include:

Clearing

The Securities and Exchange Commission (SEC) has expanded the types of transactions that must be cleared through a clearing agency. The SEC's Treasury clearing mandates require participants to set apart assets and support collateral segregation. Treasury cash clearing is required to be in place by the end of 2025, and repo clearing by June 30, 2026.

It is important to note that the SEC completed the following: "The SEC finalised its regulations on US Treasury reforms in December 2023, which includes a requirement to clear certain Treasury cash transactions from 31 December 2025 and Treasury repos from 30 June 2026." 

Currently, U.S. Treasury transactions are either settled bilaterally or cleared centrally through the Cash Collateral Account (CCA), Depository Trust and Clearing Corporation  (DTCC’s) Fixed Income Clearing Corporation (FICC). 

Nothing was said in these articles about the CFTC, but you can expect them to participate.

Repo market

The U.S. Treasury repo market is a source of financing for banks, but reforms are looking to transition it to a centrally cleared structure. crossorigin="anonymous">

Data and transparency

Market participants are expected to increase the amount of data they share with the public.

Other reforms

Other proposed reforms include:

Changes to prudential banking regulations

Increased use of electronic trading

Expanding the definition of "dealer"

Removing redemption gates from money market funds

Increasing liquidity requirements for money market funds

Requiring liquidity fees for money market funds 

Bottom line: The International Swaps and Derivatives Association (ISDA) is requiring the US Treasury Department to complete their reforms by 2025/2026. 

Remember, the SEC has completed their reforms and the above mentioned are the current protocols they use at this time. What we are looking for to be completed in retail foreign currency exchange procedures has to be done by next year. Again, the SEC has completed their reforms and currently using systems to complete a foreign currency exchange process.

I shared this with you this morning to give you an idea that a back wall date is currently in place for foreign currency exchanges, and provisions have already been made through the SEC to complete foreign currency exchange transactions until the whole Department of the US Treasury has completed their reforms. 

© Goldilocks 

https://www.securitiesfinancetimes.com/securitieslendingnews/regulationarticle.php?article_id=227231&navigationaction=regulationnews&newssection=regulation

https://www.sifma.org/explore-issues/treasury-clearing/