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.

The benefits she outlined are straightforward. Central clearing would reduce counterparty intermediation costs through netting, meaning fewer gross positions clogging up dealer balance sheets. It would improve liquidity provision during periods of market stress, exactly when it matters most. And it would strengthen the Fed’s influence on the Secured Overnight Financing Rate, or SOFR, which has become the benchmark replacement for LIBOR across trillions of dollars in financial contracts.

Why this matters now

This conversation didn’t emerge from nowhere. The push for broader central clearing in Treasury markets traces directly back to the market seizures of 2019 and 2020. The repo market chaos of September 2019, when overnight lending rates spiked to nearly 10%, exposed deep structural fragilities. Then the March 2020 Treasury market meltdown during COVID’s onset made the problem impossible to ignore.

Logan has been building this argument for over a year. A September 2025 Dallas Fed paper she co-authored with Sam Schulhofer-Wohl explored potential pathways for modernizing the FOMC’s operational framework in light of the clearing evolution. Her July 9 remarks represent the most direct public endorsement yet of the Fed voluntarily joining the cleared ecosystem.

The timeline is also converging. The SEC’s phased mandate for central clearing of cash Treasury operations completes by June 30, 2027. Centrally cleared repo volumes have already been climbing since the SEC’s ruling, suggesting the industry is adapting ahead of schedule.

There’s an institutional logic at play too. If every major private-sector counterparty is required to clear through FICC, but the Fed’s own operations run on a separate, bilateral track, you end up with a fragmented plumbing system. That fragmentation could actually reduce the effectiveness of the very tools the Fed uses to implement monetary policy, from repo operations to its standing facilities.

What this means for investors

For traditional fixed-income investors, the implications are relatively direct. If the Fed voluntarily clears its open market operations, it could narrow spreads in the repo market by reducing the balance sheet costs that dealers face when intermediating between the Fed and the rest of the market.

The risk side deserves attention too. Concentrating more activity through FICC means concentrating more systemic risk in a single entity. Central clearing concentration has been flagged repeatedly by the Financial Stability Board as a potential vulnerability in global markets.