Notice2026-04781
Notice of Request for Exemptive Relief, Pursuant to Section 36(a) of the Securities Exchange Act of 1934, From Certain Aspects of Rule 17ad-22(e)(18)(iv) of the Securities Exchange Act of 1934 and Request for Comment
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Published
March 11, 2026
Issuing agencies
Securities and Exchange Commission
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<title>Federal Register, Volume 91 Issue 47 (Wednesday, March 11, 2026)</title>
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[Federal Register Volume 91, Number 47 (Wednesday, March 11, 2026)]
[Notices]
[Pages 12030-12032]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-04781]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104944; File No. S7-2026-07]
Notice of Request for Exemptive Relief, Pursuant to Section 36(a)
of the Securities Exchange Act of 1934, From Certain Aspects of Rule
17ad-22(e)(18)(iv) of the Securities Exchange Act of 1934 and Request
for Comment
March 6, 2026.
I. Introduction
On December 13, 2023, the Securities and Exchange Commission (the
``Commission'' or ``SEC'') adopted,\1\ among other things, Rule 17ad-
22(e)(18)(iv)(A) (the ``Trade Submission Requirement'') \2\ under the
Securities Exchange Act of 1934 (``Exchange Act''). The Trade
Submission Requirement requires a covered clearing agency that provides
central counterparty services for transactions in U.S. Treasury
securities (``U.S. Treasury securities CCA'') \3\ to establish,
implement, maintain and enforce written policies and procedures
reasonably designed to require that any direct participant must submit
for clearance and settlement all ``eligible secondary market
transactions'' to which that direct participant is a counterparty. An
``eligible secondary market transaction'' is, in turn, defined as (i) a
repurchase or reverse repurchase agreement collateralized by U.S.
Treasury securities, in which one of the counterparties is a direct
participant (``repo''); or (ii) a purchase or sale, between a direct
participant and: (A) any counterparty, if the direct participant of the
covered clearing agency brings together multiple buyers and sellers
using a trading facility (such as a limit order book) and is a
counterparty to both the buyer and seller in two separate transactions;
or (B) a registered broker-dealer, government securities broker, or
government securities dealer.\4\
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\1\ Standards for Covered Clearing Agencies for U.S. Treasury
Securities and Application of the Broker-Dealer Customer Protection
Rule With Respect to U.S. Treasury Securities, Exchange Act Release
No. 99149 (Dec. 13, 2023), 89 FR 2714, 2737 (Jan. 16, 2024)
(``Adopting Release'').
\2\ 17 CFR 240.17ad-22(e)(iv)(A).
\3\ The U.S. Treasury securities CCAs are the Fixed Income
Clearing Corporation (``FICC''), the CME Securities Clearing Corp.
(``CMESC''), and ICE Clear Credit, LLC (``ICC'').
\4\ 17 CFR 240.17ad-22(a).
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On February 27, 2026, a trade association submitted a letter to the
Commission requesting exemptive relief from the Trade Submission
Requirement for certain Non-U.S. Transactions, specifically, the
transactions of foreign financial institutions who are direct
participants of a U.S. Treasury securities CCA when transacting with
non-U.S. clients, as discussed further below.\5\ We are publishing this
notice to provide interested persons with an opportunity to comment on
the request for exemptive relief pursuant to Section 36 \6\ of the
Exchange Act.\7\
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\5\ See Letter from Stephanie Webster, General Counsel,
Institute of International Bankers (``IIB'' or ``association''),
dated Feb. 27, 2026 (``IIB Letter'').
\6\ 15 U.S.C. 78mm. Section 36(a)(1) of the Exchange Act gives
the Commission the authority to exempt any person, security or
transaction or any class or classes of persons, securities or
transactions, conditionally or unconditionally, from any Exchange
Act provision by rule, regulation or order, to the extent that the
exemption is necessary or appropriate in the public interest and
consistent with the protection of investors.
\7\ 15 U.S.C. 78a et seq.
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II. Requested Relief
The association stated that many foreign financial institutions are
direct participants of U.S. Treasury securities CCAs to realize the
benefits of central clearing, including multilateral netting, and to
promote their ability to trade with U.S. financial institutions.\8\ The
association stated that foreign financial institutions use a diversity
of trading models with respect to their participation in U.S. Treasury
securities CCAs, including in some instances participating through U.S.
branches or broker-dealer subsidiaries, but also sometimes
participating through their (non-U.S.) head offices or other non-U.S.
branches.\9\ The association stated that the manner in which a given
financial institution participates at a U.S. Treasury securities CCA
generally depends on its internal risk management practices and the
preferences of its counterparties, some of which may prefer to transact
with a local (i.e., non-U.S.) branch.\10\
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\8\ IIB Letter, supra note 5, at 3.
\9\ Id. at 3.
\10\ See id.at 3.
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The association stated that, when a financial institution is
approved as a direct participant of a U.S. Treasury securities CCA,
that direct participant becomes subject to the rules of that U.S.
Treasury securities CCA, including any rules required to implement the
Trade Submission Requirement.\11\ However, the association states that
such foreign financial institutions face a question regarding the
``potential extraterritorial scope'' of the Trade Submission
Requirement, including the potential application of the Trade
Submission Requirement to eligible secondary market transactions
between a foreign financial institution direct participant in a U.S.
Treasury securities CCA (e.g., a foreign bank's head office) and its
foreign investor clients.\12\ The
[[Page 12031]]
association raises several potential consequences arising from the
application of the Trade Submission Requirement to such transactions.
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\11\ 15 U.S.C. 78s(g)(1) (``Every self-regulatory organization
shall comply with the provisions of this title, the rules and
regulations thereunder, and its own rules, and (subject to the
provisions of section 17(d) of this title, paragraph (2) of this
subsection, and the rules thereunder) absent reasonable
justification or excuse enforce compliance . . . in the case of a
registered clearing agency, with its own rules by its
participants'').
\12\ See IIB Letter, supra note 5, at 3.
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First, the association states that there exists legal uncertainty
regarding whether fundamental requirements to central clearing, such as
netting (including close-out netting in a default scenario), are
enforceable in all relevant jurisdictions.\13\ This legal uncertainty
also exists for the direct participant's non-U.S. counterparties, who
would likely need to access central clearing indirectly through a
direct participant, and it remains unclear whether U.S. Treasury
securities CCAs would or could accept non-U.S. counterparties from
every relevant foreign jurisdiction as indirect participants.\14\
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\13\ See id.
\14\ See id.
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Second, the association states that clearing trades for non-U.S.
clients could raise questions under non-U.S. law, including whether
doing so could require the direct participant acting as a clearing firm
to register as a broker in those jurisdictions.\15\
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\15\ See id. at 3-4.
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Third, the association states that no U.S. Treasury securities CCA
currently operates on a 24-hour basis.\16\ Therefore, a direct
participant located in, for example, Singapore, operationally may be
unable to submit its repo trades with Singaporean counterparties to a
U.S. Treasury securities CCA in a prompt and accurate manner when the
U.S. Treasury securities CCA does not open until hours after the
counterparties enter into the repo transaction.\17\ Relatedly, the
association states that FICC does not facilitate Euroclear settlement,
which means that non-U.S. participants clearing a non-U.S. transaction
that customarily would settle through Euroclear requires additional
steps to bring the repo into the Depository Trust Corporation via
Fedwire.\18\
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\16\ See id. at 4. IIB further stated that the Commission's
analysis of this issue when adopting the Treasury clearing rules is
inapposite to bilateral repos conducted outside the United States.
Id.
\17\ See id. (stating that, at a minimum, ``the Commission would
need to clarify the timeframe in which these transactions must be
submitted for clearing and weigh the benefits of requiring an
overnight transaction to be cleared if it cannot be submitted until
halfway through its term when the applicable covered clearing agency
opens'').
\18\ See id. The association referred to FICC which, at the time
of the letter, was the only operational U.S. Treasury securities
CCA. The Commission understands that no existing covered clearing
agency facilitates Euroclear settlement at this time.
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Fourth, the association states that ``an almost unlimited mandate
to clear foreign financial institutions' transactions'' would bring in
scope non-U.S. counterparties that are transacting only locally, are
unlikely to be familiar with the evolving conventions of the U.S.
domestic repo market, and are therefore far less likely to sign onto
documentation that, in their domestic market, is wholly novel, not
explained by a local law requirement, and burdensome.\19\
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\19\ See id.
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The association states these issues could lead non-U.S.
counterparties to question their participation in the U.S. Treasury
securities market more broadly when they have alternative government
bond markets in which they could invest without raising these issues or
more generally incurring the costs of central clearing.\20\ The
association states that a shift by foreign investors away from U.S.
Treasuries to, for example, European or Asian sovereign bonds could
materially increase the U.S. government's borrowing costs and impair
overall U.S. Treasury security market liquidity and resiliency.\21\
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\20\ See id.
\21\ See IIB Letter, supra note 5, at 4.
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The association states that reduced counterparty interest in the
U.S. Treasury securities market could also lead some foreign financial
institutions to question the costs and benefits of continuing to
participate in U.S. Treasury securities CCAs as direct participants,
given that withdrawal from U.S. Treasury securities CCAs would
eliminate any extraterritorial application of the Trade Submission
Requirement.\22\ Also, the association states that market participants
accessing central clearing indirectly, either through foreign financial
institution or through other firms, would be harmed through a reduction
in their choice of potential clearing firms, which could result in
increased costs to access clearing.\23\ Finally, the association states
that reduced participation and liquidity in cleared repos could also
impact the secured overnight financing rate (``SOFR''), the calculation
of which depends on those repos and which is used as a benchmark
interest rate for many transactions.\24\
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\22\ See IIB Letter, supra note 5, at 5.
\23\ See id.
\24\ See id.
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The association requests that the Commission grant an exemption
from the Trade Submission Requirement for an eligible secondary market
transaction between a Non-U.S. Participant and a Non-U.S. Client (such
transaction, a ``Non-U.S. Transaction'').\25\
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\25\ See id. at 5-6.
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For this purpose, a ``Non-U.S. Participant'' would mean a direct
participant of a U.S. Treasury securities CCA that is not:
<bullet> a U.S. person (as defined by Exchange Act Rule 3a71-
3),\26\
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\26\ IIB states that it proposes to rely on this ``U.S. person''
definition because it is broadly familiar to market participants
active in cross-border securities markets due to its use for
purposes of Title VII of the Dodd-Frank Act. See IIB Letter, supra
note 5, at 6 n. 11.
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<bullet> a U.S. branch of a non-U.S. person, or
<bullet> a non-U.S. person whose obligations under the transaction
are guaranteed by a U.S. person.\27\
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\27\ For this purpose, a transaction would be guaranteed by a
U.S. person if the counterparty to the transaction had rights of
recourse against a U.S. person, i.e., has a conditional or
unconditional legally enforceable right, in whole or in part, to
receive payments from, or otherwise collect from, the U.S. person in
connection with the transaction. See IIB Letter, supra note 5, at 6
n. 12.
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A ``Non-U.S. Client'' would mean a counterparty to a Non-U.S.
Participant that is not:
<bullet> a direct participant of a U.S. Treasury securities CCA,
<bullet> a U.S. person,
<bullet> a U.S. branch of a non-U.S. person, or
<bullet> a non-U.S. person whose obligations under the transaction
are guaranteed by a U.S. person.
III. Request For Comment
We request and encourage any interested person to submit comments
on the requested relief, including whether the Commission should grant
the exemptive relief. In particular, we solicit comments on the
following questions:
1. Do commenters agree that the Commission should grant an
exemption from the Trade Submission Requirement for an eligible
secondary market transaction between a Non-U.S. Participant and a Non-
U.S. Client (such transaction, a ``Non-U.S. Transaction'')?
2. If granting this relief, is it appropriate to use the definition
of a U.S. person from Rule 3a71-3, or should some different definition
be used? If a different definition, which one and why?
3. Is the scope of the definition of a Non-U.S. Participant
appropriate?
4. Would the requested relief impact how market participants
structure their repo transactions or access central clearing (e.g.,
through an affiliated direct participant or by joining a U.S. Treasury
securities CCA directly)? If so, please describe the impact and how
this impact would occur.
5. Would the requested relief impact competition between different
types of direct participants of a U.S. Treasury securities CCA (e.g.,
between banks and
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broker-dealers)? If so, please describe the impact on competition and
how this impact would occur, as well as any potential mechanism to
address that impact and the potential effects thereof.
6. Would the requested relief impact competition between direct
participants of a U.S. Treasury securities CCA based on home
jurisdiction (e.g., between U.S. direct participants and non-U.S.
direct participants)? If so, please describe the impact on competition
and how this impact would occur, as well as any potential mechanism to
address that impact and the potential effects thereof. Would any such
impact change if the Commission extended the requested relief to also
cover eligible secondary market transactions of the non-U.S. branch of
a U.S. direct participant in a U.S. Treasury securities CCA, with non-
U.S. clients?
7. Would the requested relief impact competition between direct
participants of a U.S. Treasury securities CCA and any market
participants who are not direct participants of a U.S. Treasury
securities CCA? If so, please describe the impact on competition and
how this impact would occur, as well as any potential mechanism to
address that impact and the potential effects thereof.
8. Would the requested relief have any impact on existing U.S.
reporting requirements (e.g., FINRA's TRACE reporting or the
requirements with respect to certain non-centrally cleared bilateral
repo reporting established by the Office of Financial Research within
the U.S. Department of the Treasury \28\)? Please explain.
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\28\ See 12 CFR part 1610.
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9. Would the requested relief have any impact on liquidity and/or
overall resiliency of the U.S. Treasury markets? If so, please describe
the impact on liquidity and overall resiliency and how the impact would
occur.
10. Would the requested relief have any impact on foreign
participation in U.S. Treasury markets? If so, please describe the
impact on foreign participation and how the impact would occur.
11. Would the requested relief impact a U.S. Treasury securities
CCA's ability to risk manage the transactions of its direct
participants? If so, please describe the impact on a U.S Treasury
securities CCA's risk management.
12. Would the requested relief impact contagion risk \29\ for U.S.
Treasury securities CCAs, or systemic risk more broadly?
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\29\ See Adopting Release, supra note 1, 89 FR at 2717, 2741-42.
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13. Would the requested relief impact any of the benefits that the
Commission identified as arising from the Trade Submission Requirement,
such as decreasing counterparty credit risk, decreasing the risk of a
disorderly member default, increasing multilateral netting? \30\
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\30\ See id. at 2717-18.
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14. Should we add any conditions to the requested relief, such as
an activity limit threshold (meaning, for example, that Non-U.S.
Transactions would be exempted so long as they did not surpass a
particular portion of the direct participant's overall U.S. Treasury
market activity)? If so, please describe what those conditions should
be and why. For conditions specific to an activity limit threshold,
please describe what the threshold should be and why that threshold
would be appropriate.
15. Please describe how the requested relief would or would not
protect investors and the public interest consistent with Sections 17A
and 36 of the Exchange Act.
16. Please describe how the requested relief would or would not
help to facilitate the prompt and accurate clearance and settlement of
securities transactions as well as the safeguarding of securities and
funds consistent with Section 17A of the Exchange Act.
Comments should be received on or before April 10, 2026. Comments
may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules-regulations/exchange-act-exemptive-notices-orders">https://www.sec.gov/rules-regulations/exchange-act-exemptive-notices-orders</a>);
or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#5022253c357d333f3d3d353e2423102335337e373f26"><span class="__cf_email__" data-cfemail="7d0f081118501e1210101813090e3d0e181e531a120b">[email protected]</span></a>. Please include
File Number S7-2026-07 on the subject line.
Paper Comments
<bullet> Send paper comments to Vanessa A. Countryman, Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-1090.
All submissions should refer to File Number S7-2026-07. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules-regulations/exchange-act-exemptive-notices-orders">https://www.sec.gov/rules-regulations/exchange-act-exemptive-notices-orders</a>. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publications submitted
material that is obscene or subject to copyright protection.
For further information, you may contact Elizabeth Fitzgerald,
Assistant Director, at (202) 551-6036, or Heather Percival, Senior
Special Counsel, at (202) 551-3498, in the Division of Trading and
Markets; U.S. Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549.
By the Commission.
Dated March 6, 2026.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-04781 Filed 3-10-26; 8:45 am]
BILLING CODE 8011-01-P
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