Statement On Fixed Income Clearing Corporation Rules, SEC Chair Gary Gensler, Nov. 25, 2024

This past week, the Commission and our staff took a number of important steps to facilitate the implementation of rules regarding customer clearing in the U.S. Treasury market. I am pleased to support these actions because enhanced access to central clearing will lower costs and lower risks, while promoting all-to-all trading, competition, and resiliency in these markets.

In December 2023, the SEC adopted rules to facilitate additional central clearing for the U.S. Treasury markets.[1]

First, in March 2025, the separation of house and customer margin must be completed, ensuring that clearinghouses facilitate indirect participants as well.

When posting margin to the clearinghouse, members no longer will be able to net their customers’ positions against their own proprietary positions. This will better protect customers as well as the clearinghouse itself. Further, I think it could enhance competition as broker-dealers will no longer be able to use their customer positions to lower the margin they post to the clearinghouse.

The rules also allow for margin collected by broker-dealers from customers and other broker-dealers to be onward posted to the clearinghouse under certain conditions that are designed to provide maximum protection to the customers and other broker-dealers. Allowing such rehypothecation helps both protect these customers and other broker-dealers and free up broker-dealers’ resources.

Second, the SEC’s final rules will broaden the scope of which transactions clearinghouse members must clear. Starting at the end of 2025, the final rules mandate that clearinghouses require their members clear any Treasury cash trades executed on an inter-dealer broker (IDB) platform, with registered broker-dealers, or with registered government securities broker-dealers. Starting in June 2026, the final rules require clearinghouses in the Treasury markets to ensure that their members clear all their repo and reverse repo transactions.

 The Commission also voted not to object to on an Advance Notice that describes various proposals from the Fixed Income Clearing Corporation (FICC). In addition, the Commission, through staff delegated authority, approved three FICC rules. Further, the Commission determined that FICC’s rules meet conditions in the SEC customer protection rules regarding broker-dealers posting margin held for customers and other broker-dealers to a U.S. Treasury clearing agency.

As outlined in the Advance Notice, FICC’s rules provide for the segregation of customer margin from the margin of FICC’s members. When posting margin to the clearinghouse, members no longer will be able to net their customers’ positions against their own proprietary positions, enhancing competition.

This segregated account structure will better protect customers, whose margin will not be netted or co-mingled with that of their brokers. Keeping track of segregated accounts also will protect the clearinghouse itself, because separate margin calculations among dealers and customers will better reflect overall risk to the system.

The FICC rules approved by delegated authority provide updates to methods for customer clearing and implement certain rules that the SEC adopted last December. FICC also strengthened its risk management regime, including providing for an annual assessment and review by FICC’s Board of Directors of its customer clearing models.

Based upon the approved FICC rules, broker-dealers will be able to deposit cash and securities they hold for customers to meet FICC margin requirements arising from those customers’ cleared transactions. Further, the Commission determined that broker dealers complying with these rules will be able to get the benefit of including a debit for such rehypothecated customer margin in their reserve computations under the customer protection rule.

I’d also note that the staff of the Division of Investment Management released a statement confirming that, in the staff’s view, the FICC rules would allow a registered fund’s margin to be posted at FICC for tri-party and bilateral repurchase agreement transactions, in accordance with the Commission’s prior position.[2]

Taken together, these actions by the Commission and its staff are an important step toward the broader goal of bringing more of the U.S. Treasury markets into central clearing. Since adopting the Treasury clearing rules last December, I’ve been encouraged by the work done across a range of market participants. Though there’s work yet to complete, there is a broad consensus that recognizes the benefits of central clearing.

I’d like to thank my fellow Commissioners, as well as the excellent members of the SEC staff who worked on this project. I particularly want to thank Chief Economist Jessica Wachter, Director of the Division of Trading and Markets Haoxiang Zhu, and Jeffrey Mooney and Elizabeth Fitzgerald in the Office of Clearance and Settlement. In addition, I want to thank:

• David Saltiel, Andrea Orr, Tom McGowan, Randall Roy, Jenny Ogasawara, Sheila Swartz, Viktoria Baklanova, Jeanine O’Mara, Richard Hrvatin, Steven Hurn, Robert Zak, Zachary Hunter, Scott Farnin, Arthur Tornabene-Zalas, John Prochilo, Roni Bergoffen, Will Miller, and Frank Pigott in the Division of Trading and Markets;

• Burt Porter and Juan Echeverri in the Division of Economic and Risk Analysis;

• Meridith Mitchell, Robert Teply, Donna Chambers, and Sean Bennett in the Office of the General Counsel; and

• Natasha Vij Greiner, Sarah ten Siethoff, Kaitlin Bottock, Trace Rakestraw, Shayna Gilmore, and Jacob Krawitz in the Division of Investment Management.