SEC Issues Exemptive Relief from Treasury Clearing Requirements for Certain Inter-Affiliate and Non-U.S. Repo Transactions

Key dates

2023-12-13

The SEC adopted the Treasury clearing amendments, including the trade-submission requirement implemented through Exchange Act Rule 17ad-22(e)(18)(iv)(A).

2026-10-30

The SEC issued exemptive relief for specified inter-affiliate and non-U.S. Treasury repo transactions.

2026-12-31 Deadline

Compliance date for applicable eligible secondary market cash transactions involving U.S. Treasury securities.

2027-06-30 Deadline

Compliance date for applicable eligible secondary market repo transactions involving U.S. Treasury securities.

Suggested considerations

• Firms should obtain and analyze the operative October 30, 2026 Section 36 exemptive order, including all limits, conditions, definitions, recordkeeping provisions, and any continuing reporting requirements.
• Compliance teams may wish to inventory all Treasury repo transactions by legal entity, counterparty location, direct-participant status, affiliate relationship, guarantee structure, and whether the transaction is market-facing or solely inter-affiliate.
• Firms should validate whether each proposed affiliate qualifies under Rule 17ad-22(a) as modified by the relief and confirm that the affiliate is not an investment company under Section 3 of the Investment Company Act of 1940.
• Broker-dealers and other direct participants should update trade-classification, order-management, confirmation, clearing-submission, exception-management, and surveillance controls to distinguish exempt transactions from transactions that must be submitted for clearing.
• Global firms should establish governance for monitoring any activity-based or volume-based limit applicable to non-U.S. repo relief, including data ownership, aggregation across affiliates and direct participants, calculation frequency, escalation thresholds, and evidence retained for supervisory review.
• Firms should continue implementation of the broader Treasury clearing framework and should not treat the relief as a basis for delaying preparations for the December 31, 2026 cash-market or June 30, 2027 repo compliance dates.
• Legal and compliance teams may wish to assess whether non-U.S. branches, foreign affiliates, guarantees by U.S. persons, or local-law requirements create additional obligations notwithstanding the SEC relief.

What changed

The relief applies to certain repo transactions involving non-U.S. counterparties, subject to specified limits and conditions. It also expands the inter-affiliate treatment for repos between a direct participant of a U.S. Treasury securities covered clearing agency and an affiliated entity that is not an investment company under Section 3 of the Investment Company Act of 1940, provided the affiliate otherwise meets the affiliated-counterparty definition in Rule 17ad-22(a). The underlying Treasury clearing framework was adopted in December 2023 and requires covered clearing agencies to maintain policies requiring direct participants to submit eligible secondary market transactions for clearance and settlement under Exchange Act Rule 17ad-22(e)(18)(iv)(A). The SEC publication does not state

Who is affected

• U.S. and non-U.S. broker-dealers that are direct participants of U.S. Treasury securities covered clearing agencies
• Banking groups and other corporate groups using inter-affiliate Treasury repo for liquidity, treasury, collateral, or funding management
• Non-U.S. affiliates and non-U.S. counterparties entering into Treasury repo transactions with or through direct participants
• Covered clearing agencies and their direct participants responsible for trade-submission controls and eligibility determinations

Related regulations

• Exchange Act Rule 17ad-22(e)(18)(iv)(A)
• Exchange Act Rule 17ad-22(a)
• Section 36 of the Securities Exchange Act of 1934
• Section 3 of the Investment Company Act of 1940
• Exchange Act Rule 3a71-3