SEC exempts certain affiliate and non-U.S. repo trades from Treasury clearing requirements

The Securities and Exchange Commission announced exemptions from Treasury clearing requirements for certain inter-affiliate and non-U.S. repurchase, or repo, transactions.^[1]

A repo is short-term financing: one party sells securities and agrees to buy them back later, effectively borrowing cash against those securities—in this case, U.S. Treasuries. Inter-affiliate transactions take place between entities within the same corporate group. The relief applies to specified categories, and its reach depends on which transactions qualify.^[1]

Central clearing puts a clearinghouse between the trading parties to manage the risk that a trade is not fulfilled. Exempt transactions can avoid moving into central clearing to meet this requirement, potentially saving qualifying banks and securities dealers some clearing fees and changes to systems and operating processes.^[1]

Where those trades remain directly between the parties, firms still have to manage the risk that their counterparty fails to perform. The savings depend on the exemption terms and the amount of trading that qualifies; the available announcement does not provide enough detail to quantify them.^[1]

Impact