By Michael S. Derby
(Reuters) – A top official at the Federal Reserve Bank of New York said on Wednesday that now is the time for market participants to prepare for new clearing rules looming in the Treasury market.
Citing a new Securities and Exchange Commission rule requiring central clearing in the Treasury market, Michelle Neal, who heads the New York Fed’s Markets Group, said: “Given the importance and scope of this change in the market structure, it is critical for market participants to act now to determine how the SEC rule affects their businesses and develop plans for clearing eligible transactions.”
“Sovereign bond clearing should come into effect by the end of 2025, and repo clearing should come into effect no later than June 30, 2026,” Neal said in the text of a speech to be delivered to the ISDA/SIFMA Treasury Forum. in New York City. “While these dates may seem far away now, time will pass quickly given the complexity involved.”
Neal said in her remarks that the new central clearing system will have a tangible impact on the markets. “Practically, these changes are expected to result in a significant migration of Treasury repos and reverse repos to central clearing,” she said, adding that “electronic cash trading from the main trading firm is likely to transition to central clearing.”
Neal also noted that the new regime also brings transparency benefits. “More transactions are taking place [central clearing platforms] would also increase the visibility of clearing and settlement flows for the official sector, improving market monitoring,” she said.
(Reporting by Michael S. Derby; Editing by Chizu Nomiyama)
