SEC exempts more affiliate and capped non-US repo from Treasury clearing; cap falls to 10% by 2030

The Securities and Exchange Commission issued an exemptive order on 30 October that narrows which US Treasury repo transactions must be submitted to a covered clearing agency. The order, Release No. 34-106789, exempts two groups of trades from the definition of an “eligible secondary market transaction” in Rule 17ad-22(a). The first group is a capped amount of repo with non-US clients. The second is repo between a direct participant and a wider set of its affiliates.

The Commission adopted the Treasury clearing rule in December 2023. In February 2025 it moved the compliance dates back by one year, to 31 December 2026 for eligible cash transactions and 30 June 2027 for eligible repo.

“Today’s targeted relief addresses practical concerns while preserving the important benefits of central clearing,” said Commissioner Mark T. Uyeda, whom Chairman Paul S. Atkins has designated to lead the agency’s initiative to oversee the transition to central clearing of US Treasury transactions.

One order for two requests

The order answers two requests that the Commission put out for comment earlier in the year:

• Institute of International Bankers (IIB): on 27 February the IIB asked for relief for foreign financial institutions that are direct participants of a Treasury clearing agency when they trade with non-US clients. It cited legal uncertainty abroad over the enforceability of clearing arrangements, possible registration requirements for clearing firms in those jurisdictions, and repo that takes place when no US Treasury clearing agency is open.
• SIFMA: on 10 April SIFMA asked the Commission to widen the inter-affiliate exclusion to more types of affiliate. It also asked that the exclusion’s “outward facing condition” stop capturing repo between non-US affiliates and non-US counterparties below an activity threshold.

Commenters suggested handling the IIB request and SIFMA’s second request together. On 7 August the Commission reopened comment on both (Release No. 34-106062) and published a preliminary combined approach, which we reported at the time. The comment periods closed on 31 August. The order issued on 30 October is a modified version of that approach.

Non-US repo: a falling percentage cap or $5bn

The non-US relief covers “Qualifying Non-U.S. Transactions”. These are uncleared repo transactions that would otherwise be in scope, between two parties:

• A “Non-U.S. Client”. This is an entity that is not a direct participant of a Treasury clearing agency, not a US person, not a US branch of a non-US person, and not a non-US person whose obligations under the trade are guaranteed by a US person.
• One of three counterparties:
  • a non-US direct participant;
  • a non-US affiliated counterparty of a direct participant;
  • a foreign branch of a direct participant that is a US person.

The first two are subject to the same exclusions for US persons, US branches of non-US persons and US guarantees. The third covers foreign branches of US-person direct participants.

The relief applies only if the firm meets one of two tests. The order defines “firm” as a direct participant together with its affiliates, so the tests are measured across the consolidated group, including any other direct participants in it.

• Firm-Specific Threshold. The market value of the firm’s Qualifying Non-U.S. Transactions, divided by the sum of its cleared repo plus those same transactions, must be below the Percentage Cap. Cleared repo here excludes repo between a direct participant and an affiliated counterparty. “Market value” is the principal amount of the opening leg of the repo.
• Fixed Dollar Threshold. The market value of the firm’s Qualifying Non-U.S. Transactions must be below $5bn.

Both tests use a rolling daily average of the three preceding quarters, with each quarter weighted equally. The Commission had asked whether recent quarters should count for more. Commenters replied that unequal weighting could be complex and cause unexpected swings.

The Percentage Cap falls in four steps:

Period	Percentage Cap
30 June 2027 to 30 June 2028	25%
1 July 2028 to 30 June 2029	20%
1 July 2029 to 30 June 2030	15%
After 30 June 2030	10%

The Commission wrote that the phased approach “most appropriately balances the need for the exemption to be narrow while also recognizing that market participants, particularly foreign entities, may need time to change or adapt business practices, onboard clients, obtain legal opinions, or update systems in order to comply.” The order notes that the IIB had suggested 25% for two years, falling gradually to 10%. SIFMA did not object to 20% for one year, moving gradually to 10%.

Changes from the August version

• The denominator is based on cleared repo. It now includes cleared repo that falls outside the mandate because of who the counterparty is, so a firm that clears trades it is not required to clear gets credit for them. The Commission rejected calls to count uncleared repo, writing that the exemption “should be based on a percentage of the firm’s cleared activity.”
• Inter-affiliate repo is removed from the denominator. Commenters had argued that these trades are not market activity.
• The dollar threshold is new. Commenters proposed it so that firms whose Treasury repo business is mainly outside the US are not disadvantaged against firms with a large US business. One commenter proposed $10bn, to allow for growth in Treasury repo. Another cautioned against a level high enough to create a bifurcated market. The Commission set $5bn “to accommodate the need for such a threshold while reducing the risk of a bifurcated market”, and said it will monitor whether the figure “remains appropriately tailored to the U.S. Treasury market.”

Attestation

The second condition is new. A direct participant must attest to every Treasury clearing agency of which it is a member that it is monitoring and complying with the threshold test. If it fails the test, it must immediately notify each of those clearing agencies. It must then either set out its plan for returning to compliance or say that it will stop relying on the relief. Each clearing agency then decides what action to take under its own rules.

Inter-affiliate repo: non-bank affiliates included, investment companies excluded

The rule as adopted lets a direct participant leave repo with an “affiliated counterparty” uncleared, provided the affiliate clears all its other repo (the “outward facing condition”). It defines that counterparty using three tests:

• (i) Regulated status. The affiliate must be a bank, broker, dealer or futures commission merchant, or regulated as one in its home jurisdiction.
• (ii) Ownership. The affiliate and the direct participant must be linked by majority ownership.
• (iii) Consolidation. The majority owner must report consolidated financial statements under US GAAP or IFRS that include the majority-owned party.

The order exempts repo between a direct participant and any entity that meets tests (ii) and (iii), which removes the regulated-status test. Any entity that is an “investment company” under Section 3 of the Investment Company Act of 1940 is excluded, “regardless of whether such investment company is registered or required to be registered”. The Commission’s reason for the exclusion is that such an affiliate “may pose additional risk to the direct participant due to it taking market positions on the value of securities.”

According to the order, commenters said that many affiliates depend on repo with the direct participant for liquidity, treasury and collateral management. Many of those affiliates are not banks, broker-dealers or futures commission merchants, so without relief their trades would have had to be cleared. The order states that this relief does not change the June 2026 order for private funds that clear through captive clearing subsidiaries (Release No. 34-105736). Part III of the order, which grants the inter-affiliate relief, does not refer to the outward facing condition. The order discusses the condition elsewhere, in its background section and in the reasoning for the non-US relief, but does not say whether it applies to affiliates that are eligible only because of Part III. By contrast, the June private fund order expressly kept the condition.

A separate request of 10 September from SIFMA and SIFMA AMG for relief for REIT groups is cited in a footnote to the order but is not decided in it.

Why it matters

Analysis. For repo and funding desks at foreign banks, and at US dealers with foreign branches, the order answers the main scope question that was left open in August: how much of their non-US client repo can stay bilateral once repo clearing begins on 30 June 2027. The answer is a group-wide limit that tightens each year. Firms with large cleared US books get more headroom, because the cap is a share of cleared activity. Smaller groups focused outside the US can rely on the $5bn floor. Counting voluntarily cleared trades in the denominator gives firms a direct reason to clear more than they must.

Firms now have to build new processes. The test runs daily across every consolidated entity, uses three quarters of history, and must be backed by an attestation to FICC or any other Treasury clearing agency of which the firm is a direct participant. With the cap falling to 10% after June 2030, client onboarding and legal opinions on netting enforceability in each jurisdiction become a multi-year programme. Opening the inter-affiliate exclusion to non-bank affiliates removes a requirement that would have forced intra-group funding trades through a clearing agency. Repo with affiliates that are investment companies is not covered by the new inter-affiliate relief.

What we are watching

• How the three-quarter Assessment Period applies when the 25% Percentage Cap first takes effect on 30 June 2027. The order does not address this.
• Rule or procedure changes at Treasury clearing agencies setting out how attestations and breach notices are submitted and handled.
• Whether the Commission confirms how the outward facing condition applies to affiliates that are newly eligible under the order.
• Whether the Commission revisits the $5bn threshold, which it says it will monitor, and how it answers the REIT group request.

Sources

• Release No. 34-106789: Order Granting Exemptive Relief from the Definition of an “Eligible Secondary Market Transaction” in Rule 17ad-22(a), U.S. Securities and Exchange Commission, 30 Oct 2026
• Press release 2026-111: SEC Issues Exemptive Relief from Treasury Clearing Requirements for Certain Inter-Affiliate and Non-U.S. Repo Transactions, U.S. Securities and Exchange Commission, 30 Oct 2026
• Press release 2025-43: SEC Extends Compliance Dates and Provides Temporary Exemption for Rule Related to Clearing of U.S. Treasury Securities, U.S. Securities and Exchange Commission, 25 Feb 2025
• Release No. 34-106062: Reopening of Comment Period; Notices of Request for Exemptive Relief from Certain Aspects of Rule 17ad-22(e)(18)(iv) and Requests for Comment, U.S. Securities and Exchange Commission, 7 Aug 2026
• Release No. 34-105736: Order granting conditional exemptive relief for transactions cleared through captive clearing subsidiaries, U.S. Securities and Exchange Commission, 18 Jun 2026
• Treasury Clearing Implementation, U.S. Securities and Exchange Commission, accessed 1 Nov 2026