SEC Staff Issues Clearing Agency No-Action Relief for Distributed Ledger Settlement Platform Permitting Limited U.S. Participation

Overview

On May 4, 2026, the U.S. Securities and Exchange Commission (SEC) Division of Trading and Markets staff (“Staff”) issued a no-action letter (“Relief”) stating that it would not recommend enforcement action under Section 17A(b)(1) of the Securities Exchange Act of 1934 if HQLAx S.à r.l. (“HQLAx”), a Luxembourg-regulated financial sector entity, and Clearstream International S.A. (“Clearstream”), also regulated in Luxembourg, permit limited U.S. participation on the HQLAx settlement platform (the “Platform”). 

Section 17A(b)(1) generally requires entities performing clearing agency functions to register with the SEC. The Relief addresses potential clearing agency exposure arising from the operation of the Platform and will enable a narrow set of U.S. participants to access the Platform on a temporary basis without such registration. 

The Platform is notable for its use of a private, permissioned distributed ledger (blockchain-based) system to facilitate the settlement of securities financing transactions through digital collateral records (DCRs) that represent book-entry interests in securities held in Clearstream’s custody. The SEC’s position reflects a limited, conditional accommodation of this use of distributed ledger technology (DLT) to facilitate cross-border transactions in a regulated market.

Reliance Conditions

The Staff’s position requires HQLAx and Clearstream to adhere to the following conditions.

1. Limited Scope of U.S. Participation

• Participation is capped at no more than 15 U.S. participants.
• Eligible participants must be SEC-registered broker-dealers with ≥ $100 million excess net capital, or banks with ≥ $10 billion in total assets.

2. Restrictions on Activity (Volume Limits)

• Activity involving U.S. participants must remain below $25 billion average daily transaction value, and 100,000 average daily transactions.
• These limits are monitored on a rolling monthly basis, and HQLAx retains discretion to restrict Platform activity to maintain compliance.

3. Eligible Securities Limitation

• Only securities used in securities lending and repurchase transactions under standard master agreements (e.g., GMSLA, GMRA, MRA) or eligible under specified tri-party collateral programs may be used.

4. Monitoring and Certification

• U.S. participants must certify eligibility prior to onboarding and annually thereafter.
• HQLAx must monitor compliance with both participant eligibility and volume limits.
• U.S. participants must certify their eligibility to HQLAx before onboarding and annually thereafter.
• HQLAx will monitor average daily value and volume of transactions submitted to the Platform to keep them within the volume limits on a rolling monthly basis.

5. Reporting and Transparency Obligations

• HQLAx is required to report quarterly to the Staff regarding participant scope changes, eligible securities used, transaction data, and volume metrics.
• Ad hoc reporting is required for material Platform changes, changes to participant scope or eligible securities, any exceedance of volume limits, or major information and communication technology incidents reported to the Luxembourg regulator.

6. Temporal Limitation

• The Relief is limited to a 36-month period, after which it automatically lapses.

Representations Underpinning the Relief

The Staff’s no-action position relies explicitly on the following representations.

Platform Structure and Function

The Platform facilitates settlement, not execution, of securities financing transactions, and all transactions occur off the Platform. The Platform records transfers via digital DCRs that represent book-entry ownership records, not independent financial instruments or crypto assets. DCRs have no standalone economic value outside the Platform.  

Custody and Legal Framework

Securities are held in custody by Clearstream (or its sub-custodians), and DLT updates correspond to transfers on custodial books and mirror book-entry transfers. Transfers effected via DCR updates constitute valid book-entry transfers under Luxembourg law. In short, this approach allows for the use of a DLT-based overlay while maintaining a traditional custody backbone.    

Regulatory Status and Oversight

Of note, both HQLAx and Clearstream are regulated in Luxembourg, and subject to prudential, anti-money laundering, and operational resilience requirements. At the time of the request, there were no U.S. participants on the Platform.

Risk Mitigation Features

The Platform includes strong operational resilience and disaster recovery controls, controlled participation and capped activity, and ongoing regulatory reporting and transparency.

Takeaways

1. Narrow, Controlled Path for DLT-Based Settlement Involving U.S. Participants

The Relief signals an iterative but pragmatic approach to permitting U.S. access to non-U.S. DLT-based post-trade infrastructure without requiring immediate registration; provided that exposure is regulated and limited. Of note, U.S. participants are required to be highly sophisticated, regulated, financial intermediaries. 

2. Importance of Function and Utility

The Platform is characterized as a settlement and recordkeeping mechanism, not a trading venue or standalone asset system with DCRs functioning as ledger entries rather than securities or crypto assets. This distinction appears central to avoiding immediate clearing agency registration implications but does signal a step in the SEC’s continued effort to facilitate infrastructure modernization using DLT. 

3. Heavy Reliance on Quantitative and Qualitative Guardrails

The Relief is limited in time and scope with the Staff requiring hard caps on the number of U.S. participants and volume limits, combined with ongoing monitoring, regulatory reporting, and event-driven notifications. This suggests future relief may depend on similarly robust control frameworks.

4. Cross-Border Deference with Conditions

The Relief also appears to recognize the interconnected nature of the global financial system and the growing need to address operational friction in cross-border transactions. The Staff implicitly relies on Luxembourg regulation and supervision, while imposing U.S.-specific limits and direct reporting to Staff.