Extension of Compliance Dates for Standards for Covered Clearing Agencies for U.S. Treasury Securities and Application of the Broker-Dealer Customer Protection Rule With Respect to U.S. Treasury Securities

<RULE> SECURITIES AND EXCHANGE COMMISSION <CFR>17 CFR Part 240</CFR> <DEPDOC>[Release No. 34-102487; File No. S7-23-22]</DEPDOC> <RIN>RIN 3235-AN09</RIN> <SUBJECT>Extension of Compliance Dates for Standards for Covered Clearing Agencies for U.S. Treasury Securities and Application of the Broker-Dealer Customer Protection Rule With Respect to U.S. Treasury Securities</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Securities and Exchange Commission. <HD SOURCE="HED">ACTION:</HD> Final rule; extension of compliance date. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Securities and Exchange Commission (“Commission” or “SEC”) is extending the compliance date for the amendments to the rules applicable to covered clearing agencies for U.S. Treasury securities (“U.S. Treasury securities CCAs”), which require that such covered clearing agencies have written policies and procedures reasonably designed to require that every direct participant of the covered clearing agency submit for clearance and settlement all eligible secondary market transactions in U.S. Treasury securities to which it is a counterparty and to identify and monitor its direct participants' submission of transactions for clearing, including how the U.S. Treasury securities CCA would address a failure to submit transactions, that were adopted on December 13, 2023. Specifically, the Commission is extending the compliance dates by one year, from December 31, 2025, to December 31, 2026, for eligible cash market transactions, and from June 30, 2026, to June 30, 2027, for eligible repo transactions. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> <E T="03">Effective date:</E> The effective date for this release is March 4, 2025. The effective date for the Trade Submission Requirement adopted on December 13, 2023, remains March 18, 2024. <E T="03">Compliance dates:</E> The compliance date for Rule 17ad-22(e)(18)(iv)(A) and (B), published January 16, 2024 at 89 FR 2829, is extended from December 31, 2025, to December 31, 2026, for eligible cash market transactions, and from June 30, 2026, to June 30, 2027, for eligible repo transactions. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Elizabeth L. Fitzgerald, Assistant Director, and Robert Zak, Special Counsel, Office of Clearance and Settlement, at (202) 551-5777, Division of Trading and Markets, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-7010. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> The Commission is extending the compliance date for Rule 17ad-22(e)(18)(iv)(A) and (B) under the Securities Exchange Act of 1934 (the “Exchange Act”). <SU>1</SU> <FTREF/> The Commission is not extending the compliance date for Rule 17ad-22(e)(18)(iv)(C) or Rule 15c3-3. <SU>2</SU> <FTREF/> <FTNT> <SU>1</SU>  17 CFR 240.17ad-22(e)(18)(iv)(A) and (B). </FTNT> <FTNT> <SU>2</SU>  17 CFR 240.17ad-22(e)(18)(iv)(C); 17 CFR 240.15c3-3. </FTNT> <HD SOURCE="HD1">I. Discussion</HD> On December 13, 2023, the Commission adopted, among other things, Rule 17ad-22(e)(18)(iv)(A) and (B) (together, the “Trade Submission Requirement”). <SU>3</SU> <FTREF/> The Trade Submission Requirement is designed to help reduce contagion risk to U.S. Treasury securities CCAs and bring the benefits of central clearing to more transactions involving U.S. Treasury securities. <SU>4</SU> <FTREF/> Under the Trade Submission Requirement, U.S. Treasury securities CCAs must establish, implement, maintain, and enforce written policies and procedures reasonably designed to require that every direct participant of the covered clearing agency submit for clearance and settlement all eligible secondary market transactions in U.S. Treasury securities to which it is a counterparty, and to identify and monitor the U.S. Treasury securities CCA's direct participants' submission of transactions for clearing, including how the U.S. Treasury securities CCA would address a failure to submit transactions. <SU>5</SU> <FTREF/> <FTNT> <SU>3</SU>  Exchange Act Release No. 34-99149 (Dec. 13, 2023), 89 FR 2714 (Jan. 16, 2024) (“Adopting Release”). </FTNT> <FTNT> <SU>4</SU>   <E T="03">See id.</E> at 2716. </FTNT> <FTNT> <SU>5</SU>   <E T="03">See</E> 17 CFR 240.17ad-22(e)(18)(iv)(A) and (B). </FTNT> The Commission established the compliance dates for Rule 17ad-22(e)(18)(iv)(A) and (B) as follows: (1) each U.S. Treasury securities CCA will be required to file with the Commission any proposed rule changes regarding those amendments required under Section 19(b) of the Exchange Act and/or advance notices required under Title VIII of the Dodd-Frank Act no later than 150 days following January 16, 2024, and (2) the proposed rule changes must be effective by December 31, 2025, for cash market transactions encompassed by section (ii) of the definition of an eligible secondary market transaction, and by June 30, 2026, for repo transactions encompassed by section (i) of the definition of an eligible secondary market transactions. <SU>6</SU> <FTREF/> Therefore, compliance by the direct participants of a U.S. Treasury securities CCA with the requirement to clear eligible secondary market transactions would not be required until December 31, 2025, and June 30, 2026, respectively, for cash and repo transactions. <SU>7</SU> <FTREF/> <FTNT> <SU>6</SU>  Adopting Release, <E T="03">supra</E> note 3, 89 FR at 2771. A U.S. Treasury securities CCA, the Fixed Income Clearing Corporation (“FICC”), made such a filing on June 12, 2024. <E T="03">See</E> Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Proposed Rule Change to Modify the GSD Rules Relating to the Adoption of a Trade Submission Requirement, Exchange Act Release No. 34-100417 (June 25, 2024), 89 FR 54602 (July 1, 2024) (FICC-2024-009). On Aug. 12, 2024, the Commission designated a longer period for Commission action on this proposed rule change. <E T="03">See</E> Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Designation of Longer Period for Commission Action on Proposed Rule Change to Modify the GSD Rules Relating to the Adoption of a Trade Submission Requirement, Exchange Act Release No. 34-100693 (Aug. 12, 2024), 89 FR 66746 (Aug. 26, 2024). On Sept. 26, 2024, the Commission issued an order instituting proceedings to determine whether to approve or disapprove this proposed rule change. <E T="03">See</E> Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Instituting Proceedings to Determine Whether to Approve or Disapprove a Proposed Rule Change to Modify the GSD Rules Relating to the Adoption of a Trade Submission Requirement, Exchange Act Release No. 34-101194 (Sept. 26, 2024), 89 FR 80296 (Oct. 2, 2024). On Dec. 11, 2024, the Commission designated a longer period for Commission action on this proposed rule change. <E T="03">See</E> Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Designation of Longer Period for Commission Action on Proceedings to Determine Whether to Approve or Disapprove a Proposed Rule Change, as Modified by Partial Amendment No. 1, Relating to the Adoption of a Trade Submission Requirement, Exchange Act Release No. 34-101880 (Dec. 11, 2024), 89 FR 102207 (Dec. 17, 2024). The deadline for Commission action on this proposed rule change is Feb. 26, 2025. <E T="03">Id.</E> </FTNT> <FTNT> <SU>7</SU>  Adopting Release, <E T="03">supra</E> note 3, 89 FR at 2771. </FTNT> Since the Trade Submission Requirement was adopted, Commission staff has been working with market participants, including the current U.S. Treasury securities CCA and applicants to become U.S. Treasury securities CCAs to address certain operational questions relating to implementation of these rules. As part of these efforts, Commission staff has become aware, through telephonic meetings and letters, that certain market participants believe that additional time to implement Rule 17ad-22(e)(18)(iv)(A) and (B) would be appropriate. In this regard, a group of trade associations representing different types of market participants submitted a letter requesting that the Commission extend the compliance dates established in the Adopting Release by at least one year, and a separate trade association submitted a letter requesting that the Commission extend the compliance dates for the submission of repo transactions established in the Adopting Release by 24 months. <SU>8</SU> <FTREF/> <FTNT> <SU>8</SU>   <E T="03">See</E> Letter from the Securities Industry and Financial Markets Association (“SIFMA”), SIFMA's Asset Management Group, Managed Funds Association, Futures Industry Association (“FIA”), FIA Principal Traders Group, International Swaps and Derivatives Association, Alternative Investment Management Association, and The Institute of International Bankers (collectively, the “Associations”), dated Jan. 24, 2025 (“Associations' Letter”), <E T="03">available at, e.g., https://www.sifma.org/wp-content/uploads/2025/01/SIFMA-Extension-Request-US-Treasury-Clearing-Mandate-FINAL-Clean.pdf;</E> Letter from the Investment Company Institute, dated Feb. 21, 2025 (“ICI Letter”). </FTNT> The Associations stated that they are concerned that, without an extension, the transition to central clearing will be seriously compromised and will inevitably lead to disruptions in the cash and repo markets in U.S. Treasury securities to the detriment of the financial system. <SU>9</SU> <FTREF/> The Associations identified ongoing industry work in a number of areas that requires additional time for completion, including: the development of a “done-away” market structure, both with respect to an efficient approach to trading and the establishment of new entrants for clearing and trading; the development of standard docume ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 38k characters. 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