Federal Reserve's Lorie Logan backs voluntary central clearing for open market operations

The Federal Reserve doesn’t technically have to clear its trades through a central counterparty. Lorie Logan thinks maybe it should anyway.

Logan, President and CEO of the Federal Reserve Bank of Dallas, used a New York Fed conference on market liquidity on July 9 to make the case that the Federal Open Market Committee’s open market operations would benefit from voluntary central clearing. The argument boils down to efficiency, resilience, and leading by example at a moment when the SEC is busy pushing private-sector participants toward the same destination.

What Logan is actually proposing

Here’s the thing. The SEC’s central clearing mandate, which was finalized in December 2023, requires private-sector Treasury repo participants to centrally clear their trades through the Fixed Income Clearing Corp (FICC). But that mandate explicitly does not apply to the Federal Reserve itself.

Logan’s pitch is that the Fed should voluntarily opt in. In English: the central bank would route its own repo and reverse repo operations through the same clearinghouse infrastructure that everyone else will soon be required to use.