What happened: MFA urged the SEC to work with the Fixed Income Clearing Corporation (FICC) to further amend the FICC proposed Treasury clearing rules in a comment letter on Thursday.
Why it matters: The proposed FICC rules were modified in September 2024. However, FICC left several material issues with the proposal unaddressed, including the Triennial Review Requirement. The letter explains how the Triennial Review Requirement unnecessarily increases costs and the risk of proprietary investment strategies being disclosed, and creates barriers to becoming a member of FICC.
The letter also points out that the Chicago Mercantile Exchange’s (CME) proposed clearing rules are a better approach to ensuring compliance with the clearinghouse’s rules with respect to the annual review requirement. The CME’s proposed rules meet the same regulatory objectives without the costly and excessive triennial review proposed by FICC.
MFA on the issue: The recommendation in the letter is a part of larger changes that are necessary to increase access to central clearing and improve the transition to mandatory central clearing of Treasuries. MFA outlined other recommended changes to the FICC proposal in previous letters. This is the fourth MFA letter on the proposal. In conjunction with the letter MFA issued the following statement:
“MFA is supportive of efforts to increase the central clearing of transactions in the U.S. Treasury markets. However, the infrastructure to support mandated central clearing is underdeveloped. MFA’s recommendations for the FICC proposal are a part of our effort to enhance the resiliency of the Treasury markets and U.S. economic competitiveness by increasing access to central clearing. It is imperative for financial stability that the SEC work with FICC to perfect the proposal ahead of the Commission implementing mandatory central clearing for Treasuries.” — Jennifer Han, MFA Chief Legal Officer and Head of Global Regulatory Affairs
What’s next: MFA will continue to work to ensure the infrastructure to support mandated central clearing in the U.S. Treasury market is fully developed.
