International Swaps and Derivatives Association calls for four capital and margin reforms to support mandatory US Treasury clearing

The International Swaps and Derivatives Association published CEO Scott O’Malia’s comments urging US policymakers to address four regulatory reforms that it says are necessary for mandatory clearing of US Treasury securities to work without harming market depth and liquidity. ISDA argues the issues should be resolved ahead of the compliance dates of December 31, 2026 for cash Treasury securities and June 30, 2027 for repos. ISDA’s priorities include modifying the supplementary leverage ratio to ensure banks have balance sheet capacity for intermediation and client clearing, including by permanently reintroducing an exclusion for US Treasuries that was temporarily applied in 2020. It also calls for extending margin offsets between Treasury securities and futures to client positions and having those offsets reflected in bank capital exposure measurements, warning that otherwise capital requirements will overstate risk. A third strand targets the US Basel III endgame proposal and the global systemically important bank surcharge, citing analysis that the combined effect would raise capital for US G-SIB client clearing businesses by more than 80%. Finally, ISDA points to operational readiness, noting clearing models and clearinghouse offerings are still being developed and will require regulatory approvals, testing, and agreement by a large number of counterparties; it references a one-year implementation delay agreed by the Securities and Exchange Commission and calls for continued monitoring of timelines to ensure adequate preparation time.