Dallas Fed’s Logan backs central clearing for Fed market operations

Federal Reserve Bank of Dallas President Lorie Logan said a voluntary shift to central clearing for the Federal Open Market Committee’s open market operations could make the Fed’s market interventions cheaper and more effective, improve liquidity provision in periods of stress and strengthen the central bank’s influence on the Secured Overnight Financing Rate, or SOFR. Speaking at a New York Fed conference on market liquidity on July 9, Logan argued the Fed should route its operations through central clearing infrastructure even though the SEC’s Treasury clearing mandate, which is due to take effect by June 30, 2027, does not apply to the central bank. Logan said central clearing could reduce intermediary costs and improve netting under accounting rules, lowering the amount of capital the Fed’s counterparties need to hold against positions and potentially freeing balance-sheet capacity elsewhere in the financial system. She also said a cleared structure could help the Fed inject liquidity more effectively when markets seize up, a point that resonates after the March 2020 Treasury market breakdown. Her remarks build on a September 2025 Dallas Fed paper that examined how central clearing could modernize the FOMC’s operating framework and improve policy transmission into cleared market segments. The SEC’s 2023 clearing mandate was designed in part to address vulnerabilities exposed by recent episodes of Treasury market stress, and Logan said the Fed’s voluntary participation could help smooth that broader transition. No immediate market reaction or outside commentary followed her speech.