MFA urged the U.S. Securities and Exchange Commission (SEC) to further amend the Fixed Income Clearing Corporation’s (FICC) proposed Treasury clearing rules in a supplemental comment letter. The recommendations in the letter are 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.

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 Triennial Review Requirement mandates that members conduct an independent review of compliance with FICC clearing rules.

“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,” said Jennifer Han, MFA Chief Legal Officer and Head of Global Regulatory Affairs. “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.”

The letter 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.

Read the full letter here.

Source: MFA