On the 23rd, the Bank of Korea will become the first in the country to obtain associate membership with the United States Fixed Income Clearing Corporation (FICC), enabling it to conduct Sponsored RP transactions.
According to the Bank of Korea on the 22nd, an associate member of FICC can utilize central clearing services when conducting Sponsored RP transactions with a sponsoring member.
FICC is a subsidiary of the United States Depository Trust & Clearing Corporation (DTCC) and performs clearing duties for U.S. Government Bonds, U.S. agency bonds, and mortgage-backed securities (MBS). Sponsored RP refers to the central clearing services provided by FICC.
The advantage of the Sponsored RP service is that it is more favorable in terms of transaction rates, liquidity, and efficiency compared to general RPs. Trading with a clearing member allows for transactions at better rates compared to general RPs, reducing expenses.
Currently, private financial institutions are engaging in individual clearing for U.S. Government Bonds RP transactions, but the U.S. Securities and Exchange Commission (SEC) plans to mandate central clearing of RP transactions by private institutions starting June 2027 to secure the stability and transparency of U.S. Government Bonds transactions.
Central clearing of bonds will become mandatory from December 2026, and for RPs from June 2027. Consequently, most RP transactions between clearing members and associate members are expected to transition to Sponsored RPs.
The Bank of Korea evaluated the acquisition of FICC associate membership as a proactive response to changes in the U.S. Government Bonds market. A Bank of Korea official noted, "As we proactively joined FICC, it will greatly assist domestic financial institutions that join in the future."