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Newsletter
How the U.S. Treasury Futures Market and the Basis Trade Could Be Affected by the Treasury Clearing Mandate: Part 1—A Primer
A recent mandate by the U.S. Securities and Exchange Commission (SEC) aims to improve the resilience and transparency of markets for U.S. Treasury cash securities and repurchase agreements (repos) by requiring transactions for both be cleared and settled through an authorized central counterparty (CCP). I explore the implications of this mandate for Treasury markets and central clearing in a two-part Chicago Fed Letter series. Part 1 is a primer on Treasury futures and the Treasury cash–futures basis trade—two key features of the Treasury markets that could also be affected by the mandate.
Newsletter
How the U.S. Treasury Futures Market and the Basis Trade Could Be Affected by the Treasury Clearing Mandate: Part 2—The Possible Role of Cross-Margining
In part 2 of this Chicago Fed Letter series, I delve further into the implications of the U.S. Securities and Exchange Commission’s (SEC) recent mandate requiring transactions for both U.S. Treasury cash securities and repurchase agreements (repos) to be cleared and settled through an authorized central counterparty (CCP). In part 1, I provided a primer on the Treasury futures market and the Treasury cash–futures basis trade and touched on the possible impact of the SEC mandate on both. Here, I explain in greater detail how the mandate could affect the cost and functioning of the basis ...
Working Paper
Counterparty Risk and Counterparty Choice in the Credit Default Swap Market
We investigate how market participants price and manage counterparty risk in the post-crisis period using confidential trade repository data on single-name credit default swap (CDS) transactions. We find that counterparty risk has a modest impact on the pricing of CDS contracts, but a large impact on the choice of counterparties. We show that market participants are significantly less likely to trade with counterparties whose credit risk is highly correlated with the credit risk of the reference entities and with counterparties whose credit quality is relatively low. Furthermore, we examine ...
Working Paper
Will Central Clearing Change the Market Structure of U.S. Treasury Repo to Become More Standardized and Trade on an All-to-All Basis?
This paper examines whether the SEC’s mandate for central clearing of U.S. Treasury repo transactions could enable all-to-all trading and support the development of a standardized term repo market. By mitigating counterparty risk through central clearing, cash lenders may become more willing to transact directly with a broader set of borrowers, reducing reliance on dealer intermediation. Clearing may also encourage greater participation in term repos beyond overnight tenors if counterparty risk is reduced. However, for all-to-all trading to take hold, the market must adopt more standardized ...
Working Paper
Balance-Sheet Netting in U.S. Treasury Markets and Central Clearing
In this paper, we provide a comprehensive investigation of the potential for expanded central clearing to reduce the costs of the supplementary leverage ratio (SLR) on Treasury market intermediation in both cash and repo markets. Combining a detailed analysis of the rules involved in calculating the SLR with a unique set of regulatory data, we conclude that expanding central clearing would have relatively limited effects on the level of SLRs. We do find intermediaries’ increase their balance sheet netting when their regulatory balance sheet costs are higher. Our data permits us to ...
Speech
Do You Remember?
Remarks at the 2026 U.S. Treasury Market Conference, Federal Reserve Bank of New York, New York City.