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Looking to the Horizon: Assessing a Potential Expansion of U.S. Treasury Central Clearing

By DTCC Connection | 3 minute read | September 13, 2023

DTCC’s new research paper to the industry, “Looking to the Horizon: Assessing a Potential Expansion of U.S. Treasury Central Clearing,” explores some of the potential impacts of the U.S. Securities & Exchange Commission’s (SEC) Expanded Clearing Proposal. This latest white paper is intended to present a more complete picture of both the current and potential future state of central clearing, and what the cleared Treasury markets could look like if the proposal were adopted.

Currently, U.S. Treasury Market activity is split between two disparate clearing processes: bilaterally cleared transactions and centrally cleared transactions via DTCC’s Fixed Income Clearing Corporation (FICC). Following several notable instances of market volatility, which were particularly acute in the repo market in late 2019 and at the start of the COVID-19 pandemic in early 2020, the SEC proposed several new regulations across various aspects of the U.S. Treasury Market. Among those regulatory initiatives was a proposal in September 2022 to expand the role of central clearing in the U.S. Treasury Market.

If adopted, the proposal would require more U.S. Treasury activity to centrally clear through FICC, providing market-wide benefits such as standardized risk management, reduced settlement risk, centralized default management and increased transparency.

The research paper was developed with input gathered from DTCC clients during Q2 2023 in a voluntary, anonymous in-depth 35-question survey of market participants. The survey was completed by a variety of buy-side and sell-side institutions, representing FICC / GSD Netting Members as well as sponsored member and non-member firms. This survey data was then layered with insights from the volumes of transactional activity processed by DTCC. Insights and key findings outlined in the paper include:

  • Based on its data analysis, DTCC projects approximately $1.63 trillion daily in incremental indirect participant Treasury activity to come into clearing.
  • Survey responses indicated FICC's various access models and available services are not broadly understood, and a majority of FICC members remain unsure which of FICC’s access models they want to use for the indirect participant activity.
  • FICC expects that the incremental indirect participant Treasury volume could result in a corresponding increase in Value at Risk (VaR) margin, which it conservatively estimates could be approximately $26.6 billion across the FICC / GSD membership. These estimates assume that all incremental indirect participant activity clears through one of FICC’s Gross Margin access models. The estimates could potentially decrease if the activity were cleared through one of FICC’s Net Margin models.
  • The Expanded Clearing Proposal could result in several important changes to FICC’s operations and risk management. FICC is considering several enhancements to its services, such as improved cross-margining opportunities, increasing transparency of margin and Capped Contingency Liquidity Facility (CCLF) calculations, enhanced reporting tools related to FICC’s risk management processes and operational enhancements to FICC’s novation processes and timeline.

The U.S. Treasury marketplace is the largest and most liquid sovereign debt market in the world, with transactions cleared through FICC that exceeded $1.5 quadrillion annually in 2022. Treasuries, which are backed by the “full faith and credit” of the U.S. government, are widely held and actively traded by institutional investors, central banks, corporations, individuals, and many other private and public institutions. Because the Federal Reserve uses the Treasury markets as a key tool to implement monetary policy and the federal government relies on the sale of Treasuries to finance essential services, the smooth and uninterrupted functioning of these markets is critically important to the strength and stability of the entire U.S. economy.

This latest industry paper is available on, a dedicated microsite established late last year to provide more details and information for clients and the public sector regarding FICC’s various services for Treasury activity, its direct and indirect participation models for clearing, risk management practices, governance and thought leadership.

Laura Klimpel
Laura Klimpel DTCC Managing Director, General Manager of Fixed Income Clearing & Head of SIFMU Business Development