U.S. Treasury clearing success depends on competition and choice

This article first appeared in Risk.net.

2026 promises to be a landmark year for U.S. Treasury securities, as the market - often observed to be the deepest and most liquid in the world1 - prepares for the transition to mandatory central clearing.

U.S. Securities and Exchange Commission rules passed in 2023 stipulate that most cash Treasury transactions are obligated to clear from December 31, 2026, with Treasury repurchase agreements (repos) subject to the mandate from June 30, 2027. An estimated $4 trillion in daily transaction volume will move into clearing post-mandate.2

Although voluntary U.S. Treasury clearing has been available for many years, utilization of such services has been limited, with most trades remaining bilateral. Existing Treasury clearing models are regarded as somewhat basic compared to the advanced portfolio risk management, immediate novation, collateral segregation options, customer porting tools and rigorous default management protocols that underpin clearing houses for futures and over-the-counter (OTC) derivatives. ICE Clear Credit’s clearing service for credit default swaps (CDS) provides a market-leading solution in all these areas, as evidenced by our greater than 80% market share.

As of September 2025, ICE is in the advanced stages of developing a comparable clearing service for cash Treasury securities and Treasury repos, building upon our proven CDS clearing model and leveraging our existing SEC regulatory oversight and FSOC designation as a systemically important financial market utility with access to accounts and services provided by the Federal Reserve. Ahead of our scheduled launch later in the year, let’s briefly recount the background to the clearing mandate and share some details about the ICE solution currently in the works.

Origins of the clearing mandate

Following the Global Financial Crisis (GFC), regulators around the world sought to implement a more resilient risk management structure, which included mandatory central clearing and exchange of mark-to-market payments along with initial margin collateralization for OTC derivatives, and enhanced capital requirements and liquidity ratios for banks.

Amid these reforms, the U.S. Treasury market received little attention from policymakers. Although liquidity in Treasury securities deteriorated during the height of the GFC3, the market continued to function during the credit shock that paralyzed mortgage-backed securities, corporate bonds and commercial paper markets. However, serious liquidity issues emerged in the years that followed.

On October 15, 2014, 10-year Treasury yields experienced an extraordinary 37-basis-point intraday spike, significantly straining liquidity conditions. What prompted this “flash rally” remains debated to this day.4

Between September 15-17, 2019, the Secured Overnight Financing Rate - the broad measure of the cost of overnight Treasury repo borrowing - spiked by more than 300 basis points. The precise cause is unclear, but quarterly corporate tax payments on September 16 drained institutional cash reserves on the same day primary dealers were required to settle mid-month Treasury auctions. The Federal Reserve was forced to inject liquidity into the banking system to calm markets.5

Just six months later in March 2020, COVID-19 sent institutions scrambling to sell Treasuries and raise cash. Ten-year yields spiked 64 basis points between March 9-18, and 30-year bonds lost 10% of their market value during March 16-17.

As the Group of 30 observed: “The Treasury market became essentially dysfunctional. Heavy investor demands to liquidate Treasury securities overwhelmed the capacity of dealers to intermediate the market. Treasury prices became exceptionally volatile. Bid-offer spreads quoted by dealers for off-the-run Treasuries increased by over a factor of 10. Primary dealers reported Treasury settlement failures at triple their normal levels. In short, U.S. Treasuries did not serve their traditional safe-haven role. Instead, dysfunction in the Treasury market exacerbated the crisis.”6

In the aftermath, regulators determined the most effective mechanism to strengthen the resiliency of the market would be to mandate the clearing of both cash securities and Treasury repo. The benefits of clearing are numerous:

While the SEC established the basic framework, many specifics of the mandate were left to clearing houses to flesh out. Accordingly, ICE Clear Credit’s Treasury clearing platform is based upon the proven architecture of our CDS clearing model and designed to accommodate clients’ trading and clearing preferences. Following the SEC's publication of ICE Clear Credit's US Treasury clearing application and rulebook on August 19, the platform is on schedule to launch by the end of 2025. The service will offer clients up to 12 months to become accustomed to a cleared trading environment before such workflows become mandatory, and will feature multiple customizable elements:

“Done-with” and “done-away” clearing: Buy-side market participants typically route trades into a CCP through a clearing member (a bank or broker-dealer). Today, clearing members usually only act as the clearing agent for a client trade if they are also the executing counterparty on a trade - known as a “done-with” transaction.

The alternative is a “done-away” transaction, in which a client executes a trade with one broker-dealer and utilizes another as the clearing agent. The ICE Clear Credit platform supports both done-with and done-away transactions, in addition to enabling clearing members to “self-clear” proprietary trades. ICE Clear Credit’s model ensures that done-with trades will receive the same balance sheet treatment post-mandate as they receive today.

Connectivity with a range of trading venues: ICE Clear Credit supports multiple trading protocols - including central limit order books, requests for quote and voice trades - providing clients with trading certainty and immediacy of clearing, without having to adjust their existing Treasury execution practices.

Capital efficiency and transparent risk management: ICE Clear Credit’s Treasury platform operates the same risk waterfall that has been mitigating counterparty risk in CDS for almost two decades. It also includes the segregation of client collateral and a default management framework that mutualizes risk among clearing members, meeting the internationally established “Cover 2” requirement that ensures sufficient financial resources are available to cover the worst-case simultaneous default of clearing members related to two distinct affiliate groups. Our state-of-the-art portfolio risk management approach utilizes large-scale Monte Carlo simulations to estimate initial margin requirements, with a two-day margin period of risk.

Flexible approach to physical settlement: ICE provides clients with a choice of two processes for the settlement of Treasury securities: delivery and/or receiving obligations that result from their cash and repo transactions. Clients may individually settle against their clearing member, while the clearing member settles with the clearing house across all its clients on a net basis. This approach can introduce settlement latency and relinquish some control to the clearing member. Alternatively, clients can elect to settle directly with the clearing house on a net basis, providing a more efficient and lower latency alternative.

The road ahead

What will Treasury trading look like post-mandate? We expect it to be a highly competitive and evolving landscape. Market participants have made plain their expectation for strident competition in clearing, expressing the view that competitive forces will drive innovation to modernize and strengthen the resiliency of the market.

As well as opportunities, competition also creates complexities. A robust Treasury ecosystem populated by multiple clearing venues will require participants to make strategic decisions surrounding the optimal allocation of capital, investment in operational workflows, and the management of their portfolios across differentiated liquidity pools.

While concentrating trades at a single clearing house can optimize capital utilization, netting and portfolio margining efficiencies, diversification across multiple CCPs enables market participants to reflect their cost and risk management preferences.

Furthermore, through the ICE clearing model, clearing participants benefit from the efficiencies of pre-trade credit checks and immediate novation, the elimination of bilateral counterparty credit risk, a reduced documentation burden, and the ability to trade with a broader range of counterparties.

Our goal is to make 2026 a year of competition and choice for market participants. Mandatory clearing represents one of the largest and most important transitions in the long history of U.S. Treasuries, and given the size and complexity of this market, participants deserve the opportunity to access and evaluate a number of different clearing options.

We look forward to competing and innovating throughout this important phase, and we remain committed to working with all stakeholders across the Treasury securities ecosystem to maximize the benefits of this transition to create a scalable, modernized U.S. Treasury market ready to meet challenges of the decades ahead.