In a recent whitepaper, Citadel Securities wrote that the US Securities and Exchange Commission “correctly concluded that transitioning more Treasury cash and repo transactions to central clearing will deliver significant benefits”.
However, the liquidity provider also noted that there are numerous implementation details to be clarified. Among its recommendations is a call for the SEC to “prohibit the forced bundling of execution and clearing services”.
“Since becoming a direct member of a clearing agency is not a viable pathway for many market participants due to the associated eligibility requirements and default management responsibilities, the vast majority of market participants should be expected to access central clearing through an indirect client clearing model.
“‘Done-away’ clearing…is a necessary component of an efficient client clearing model. In the absence of a viable done-away clearing model, clients will need to establish a clearing relationship with each executing counterparty in order to execute transactions subject to the mandate,” Citadel wrote.