This article outlines some of the key considerations for legal teams grappling with the upcoming rules: the difference between key clearing models and the template documentation available in the market (along with the associated legal opinions). 

Introduction

The U.S. Securities and Exchange Commission (the SEC) adopted the U.S. Treasury Clearing Rule in December 2023 (the Final Rule). The mandate represents a fundamental structural change to the world’s largest and most liquid government securities market, requiring the clearing of U.S. Treasury cash and repurchase (repo) transactions. The key objectives of the Final Rule are to reduce counterparty and systemic risk and increase market transparency.

In January 2025, the SEC approved a one-year extension to the initial deadlines, moving the compliance date for eligible cash transactions to 31 December, 2026, and for eligible repo transactions to June 30, 2027. This adjustment reflects the scale of the challenge facing market participants, as they seek to align operational frameworks and contractual terms with central clearing counterparty (CCP) requirements.

“Done-With” or “Done-Away”?

In broad terms, there are two legal and operational models to facilitate clearing; “Done-With” and “Done-Away”. The core difference in the two models is with regards to the relationship between the clearing and the execution services. 

Under a Done-With model, execution and clearing are bundled as one service delivered by a single bank/broker-dealer - the trade is executed with a bank/broker-dealer who then in turn will clear the trade at a CPP. By contrast, under a Done-Away model, the trade is executed with one bank/broker-dealer (Executing Broker) but cleared through a different bank/broker-dealer (Clearing Broker). 

The Done-With model has been in place for a number of years in the U.S. Treasury Clearing market through sponsored repo platforms and its benefits are well known. Because of the market’s familiarity with the model, the leading trade association in the U.S., the Securities Industry and Financial Markets Association (SIFMA) published in 2024 the final version of the Master Treasury Securities Clearing Agreement for the “Done-With” model (SIFMA Done-With MTSCA). 

As a result, some broker-dealers and buy-side participants have started the process of negotiating the SIFMA Done-With MTSCA.

However, much of the market are “patiently” waiting for an equivalent Done-Away template to be made available before they kick things off as the Done-Away model is regarded as offering several potential benefits including:

Consolidation of clearing operations through a preferred Clearing Broker whilst maintaining relationships with a number of Executing Brokers;

Negotiating only one clearing agreement with a preferred Clearing Broker and then clearing all their trades through that intermediary; 
Gaining margin efficiencies by aggregating and netting all trades with a single Clearing Broker.

There is an expectation that SIFMA will publish a Done-Away MTSCA template in June 2026 to give participants one year to familiarise themselves with the model, set up operationally with a CCP, seek the relevant opinions and execute the relevant documentation. If this template does not emerge soon, the market may have to satisfy clearing obligations through the Done-With model and later on re-assess their position once the Done-Away documentation is published. The resourcing, timing and cost implications of the latter option are unsurprisingly no one’s preference.

The Done-With SIFMA documentation

There are broadly three different forms of documentation that can be used to facilitate Done-With clearing, and SIFMA have published forms of agreement for each of these. 

The first one, as mentioned above, is the SIFMA Done-With MTSCA, a standalone clearing agreement (albeit one that operates in tandem with the parties’ existing GMRAs or MRAs).

Secondly, is the Master Treasury Securities Clearing Annex, which is an annex to an existing MRA or GMRA. 

Finally, there is a form of amendment to a FICC clearing agreement, which would be used only by parties who already have an existing clearing agreement entered into prior to the introduction of mandatory clearing. 

The most commonly used in the market so far is SIFMA Done-With MTSCA. Its structure follows a modular approach insofar as it has a standard form preprint and a schedule of elections and variables, split up into standard form elections and free text options to offer the ability to customise the relationship. 

Despite the SIFMA Done-With MTSCA being intended to be standard and largely non-negotiable, there are a number of areas of contention emerging that are requiring a material amount of focus and discussion. These include:

• Cross agreement set-off;
• Cross default;
• Linkage between the SIFMA Done-With MTSCA and the related MRA/GMRA;
• Porting of transactions;
• Management of failed trades;
• Conditions for exercising a right to close out; and
• Allocation of indemnity risk.

Legal opinions

Approximately 30 legal opinions are intended to be sought from key jurisdictions for the purpose of confirming netting and collateral enforceability for cleared U.S. Treasury repo transactions. The opinions will only cover the SIFMA Done-With MTSCA (with the Fixed Income Clearing Corporation as the incumbent CCP). Future opinions may cover any Done-Away documentation that emerges in due course, as well as the recently approved clearing houses, with ICE Clear Credit now being live and the CME Securities Clearing Inc. expected to launch soon.

Some of the key issues that will be addressed in the opinions are:

•    Local courts’ treatment of choice of law and jurisdiction;
•    Use of collateral in case of default;
•    Cross border collateral enforceability;
•    Netting and set-off; and
•    Insolvency risks.

Conclusion

In this article we have highlighted some key issues and considerations that have emerged to date, but things are developing rapidly as the market adjusts to the mandatory clearing model. We expect to see further developments as impacted parties adapt to the evolving market and better understand the intricacies of new operational models and documentation that emerge in the coming months.

For more information visit US Treasury Clearing - DRS - Alternative Legal Solutions.

There is an expectation that SIFMA will publish a Done-Away MTSCA template in June 2026 to give participants one year to familiarise themselves with the model, set up operationally with a clearing house, seek the relevant opinions and execute the relevant documentation.