Written by Michael S. Derby
(Reuters) – An esteemed official from the New York Federal Reserve Bank stated on Wednesday that it is crucial for market participants to start preparing for the impending clearing laws in the Treasury bond market.
Revealing a fresh regulation from the Securities and Exchange Commission that calls for central clearing in the government bond market, Michelle Neal, who is in-charge of the New York Fed’s Markets Group, emphasized, “Considering the significance and magnitude of this shift in market structure, it is absolutely vital that market participants start to comprehend how the SEC regulation will impact their operations and begin formulating plans to clear eligible transactions.”
“The mandate for Treasury cash clearing is set to be implemented by the end of 2025, and repo clearing is expected to be enforced by June 30, 2026,” Neal stated in the draft of a speech to be delivered at the ISDA/SIFMA Treasury Forum in New York. “Although these dates might seem distant at present, they will approach rapidly considering the intricacies involved.”
In her comments, Neal pointed out that the novel central clearing system will cause a noticeable shift in markets. “In practical terms, these modifications are anticipated to lead to a considerable shift of Treasury repo and reverse repo towards central clearing,” she mentioned, adding, “it is probable that principal trading firm electronic cash trading will also transition into central clearing.”
Neal further highlighted that the new system also provides the advantage of increased transparency. “The increase in trades being processed through [central clearing platforms] would also enhance visibility into clearing and settlement flows for the official sector, leading to improved market monitoring,” she remarked.
(Reported by Michael S. Derby; Edited by Chizu Nomiyama)
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