U.S Treasuries and Agency Securities
When calculating the haircut for U.S. Treasuries and agency securities, a broker-dealer must calculate separate haircuts for each of the four categories that follow, each representing a different set of maturities. These haircuts will then be added together to get the total haircut. Each category has different haircut percentages that are applied to different maturities as follows:
Category 1
- • Less than 3 months to maturity—0%
- • 3 months but less than 6 months to maturity—1/2 of 1%
- • 6 months but less than 9 months to maturity—3/4 of 1%
- • 9 months but less than 12 months to maturity—1%
Category 2
- • 1 year but less than 2 years to maturity—1 1/2%
- • 2 years but less than 3 years to maturity—2%
Category 3
- • 3 years but less than 5 years to maturity—3%
- • 5 years but less than 10 years to maturity—4%
Category 4
- • 10 years but less than 15 years to maturity—4 1/2%
- • 15 years but less than 20 years to maturity—5%
- • 20 years but less than 25 years to maturity—5 1/2%
- • 25 years or more to maturity—6%
The process for computing the haircut is quite complex. Broker-dealers must compute a haircut deduction in each category as follows: (1) compute the deductions for the net long or short positions in each subcategory; (2) aggregate the net long and net short deductions of each subcategory and add 50% of the lesser of the aggregate deductions on the long or short positions; (3) sum these two values for the total haircut within the category.
To calculate the total haircuts for all Treasury and agency positions, the broker-dealer must add the calculated haircuts for all four categories.
SEC Rule 15c3-1(c)(2)(vi)(A)
Example: Let’s look at Category 3. It has two subcategories: Treasury and agency securities in the 3- to 5-year range and Treasury and agency securities in the 5- to 10-year range