The acting SEC chair, Mark T. Uyeda’s recent statement regarding the SEC’s decision to extend the compliance dates for U.S. Treasury Clearing by 12 months asserts, “The U.S. Treasury market is a critical piece of the global financial system. New rules must be implemented properly, and any operational issues must be addressed." New deadlines of December 31, 2026, for cash transactions and June 30, 2027, for repo transactions have been communicated. The SEC also emphasized the importance of proper implementation and addressing operational issues in their press release.
While this extension is welcomed by the industry, the Securities Industry and Financial Markets Association (SIFMA) has highlighted the need to resolve various regulatory, legal, and operational issues. The additional time allows market participants to become operationally ready to ensure a smooth transition and compliance with the new rules.
The alignment of the SEC's extended compliance dates for U.S. Treasury Clearing with the UK & Europe's transition to a T+1 settlement cycle poses a significant risk to a firm's change management capacity if not properly prepared. The required efforts and complexities in technology, processes, and people are massive and should not be underestimated. Meeting these requirements will substantially impact Legal, Finance, Risk, Credit, and Trading departments. Firms that do not use the SEC's extended preparation time may face daunting operational challenges, leading to increased risks, compliance issues, and disruptions in trading and clearing activities.
"The U.S. Treasury market is a critical piece of the global financial system. New rules must be implemented properly, and any operational issues must be addressed."
Legal repapering, operating model agility and business trading strategy are just a few of the highest profile challenges DTCC Consulting Services is supporting our clients with today. We have seen many firms treat this as an Operations change, whereas the impact is considerably broader, impacting Legal, Finance, Risk, Credit and Trading behaviors and many of our clients have started out with less than a third of the workstreams needed to operationalize these changes. It is clear that a robust, firmwide governance structure and change framework will be essential in responding to this mandate effectively.
Overall, the SEC's decision provides crucial additional time for market participants to adapt to the new requirements, ensuring the stability and efficiency of the U.S. Treasury market. DTCC Consulting Services is actively working with our clients to support them in navigating the challenges presented by this new timeline and ensure requirements are met, and most importantly, opportunities are realized to optimize the trade lifecycle and capitalize on new trading and clearing strategies.
As we embark on this journey, we encourage you to reach out and learn more about how DTCC Consulting Services can support you as you prepare.