House task force weighs central clearing, leverage rules to expand primary dealer capacity

WASHINGTON — Lawmakers and industry witnesses on the House Financial Services task force examined whether central clearing, capital-rule adjustments and other market-structure changes can give primary dealers more capacity to intermediate rising U.S. Treasury issuance.

James Tabakki, who identified himself as chairman of the Independent Dealers and Traders Association and CEO of South Street Securities, told the panel that financing — particularly access to repo financing — is the principal constraint on dealers’ ability to intermediate Treasury securities. “I will tell you that unless we use every solution in the drawing board right now, we do not have the capacity for $50,000,000,000,000,” Tabakki said during his testimony.

Witnesses broadly endorsed the SEC’s program to expand mandatory Treasury clearing and described gains from central clearing, while cautioning it is not a single cure. Laura Klimpel, managing director and head of the Fixed Income Clearing Corporation at DTCC, said FICC has upgraded access and risk tools and noted the SEC’s compliance timetable: mandatory clearing for cash transactions is now scheduled to begin Dec. 31, 2026, and for repo transactions on June 30, 2027. Klimpel told the committee these changes, together with expanded sponsorship and rule changes to reduce double margining, should improve capacity and transparency.

An academic witness with recent SEC experience presented quantitative estimates. The professor said sponsor clearing at the Fixed Income Clearing Corporation had already freed roughly $1.2 trillion in balance-sheet capacity as of October 2025 and that moving remaining uncleared Treasury repo into central clearing could create additional capacity on the same order of magnitude.

Several members pressed witnesses on how central clearing interacts with leverage requirements such as the supplementary leverage ratio (SLR) and with recent Fed actions to adjust capital calibration for globally systemically important banks. Some members asked whether the effects of clearing were principally accounting changes or whether they materially reduce system risk. The witnesses answered that clearing both collapses offsetting bilateral exposures and materially reduces counterparty risk, noting that clearinghouses still require margin but that net margin is much smaller than gross bilateral exposures.

Witnesses and members also discussed other policy options. Susan McLaughlin, an executive fellow at Yale School of Management, urged attention to market-structure options beyond designation of more primary dealers, citing central clearing and “all-to-all” trading protocols as potentially more transformative than simply increasing the primary-dealer roster. Several witnesses and members raised the Fed’s standing repo facility (SRF) as a potential backstop but said usage can be stigmatized and that wider access and clearer communication from the Fed would make the tool more effective.

Lawmakers repeatedly framed the debate against rapid growth in Treasury issuance and rising budget deficits. Several members said debt growth is the fundamental long-run risk and that market-structure and prudential changes can mitigate but not eliminate the structural challenge.

The committee requested written follow-up from witnesses and set a deadline of Jan. 7, 2026, for responses. Chair remarks also signaled a request to the Government Accountability Office for an updated study of Treasury market operations; witnesses and members said that empirical evaluation would help guide whether rule or legislative changes are needed. The hearing was adjourned at the end of the questioning period.