ISDA Chief Executive Officer Scott O’Malia used a derivatiViews column to warn that major legal, operational and capital issues remain unresolved ahead of the first phase of the US Securities and Exchange Commission’s (SEC) Treasury clearing mandate, and to call for the implementation deadlines to be revisited. Under SEC rules finalised in December 2023, clearing agencies must require members to clear certain cash US Treasury securities by December 31, 2025, with repo transactions due to follow in a second phase six months later. The mandate would apply to trades conducted by member firms or their branches with any counterparty, including those outside the US, potentially bringing thousands of entities into scope. ISDA pointed to ongoing work to implement clearing models and documentation, including proposed rulebook changes from the Fixed Income Clearing Corporation, newly published proposals for a CME Group clearing offering, and ICE’s announced plans for a US Treasury clearing service. A SIFMA-led industry group that includes ISDA is developing documentation that must align with still-evolving clearing models, rulebooks and client segregation solutions, while dealers will also need to execute new documents at scale and obtain netting opinions for capital purposes. The column also highlighted prudential impediments, including pending recognition of cross-margining at the client level, a lack of recognition for cross-netting across derivatives and repo in the revised US capital framework, and constraints linked to the current US supplementary leverage ratio. It cited ISDA and SIFMA analysis that the proposed US Basel III endgame rules and the US global systemically important bank surcharge could increase capital for client clearing businesses at US G-SIBs by 80%, and argued that greater certainty on these issues is needed before the mandate takes effect.

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