Better Markets filed Comment Letter to the Securities and Exchange Commission (SEC) in response to the agency’s proposed rule to require more transactions in the U.S. Treasury markets to be cleared by a central clearing agency:
Why It Matters. The U.S. Treasury markets are generally regarded as the deepest, most liquid markets in the world, serving as the benchmark of the global financial system. However, these markets are increasingly dominated by unregistered high-frequency trading firms. That means less transparency and more instability and volatility. Recent episodes of serious disruption in the Treasury security markets have made this clear. This ever-widening regulatory gap poses a substantial threat to the stability of the U.S. financial system.
What We Said. The key to this proposal is requiring more trades to be centrally cleared, with the clearing agency standing behind each side of each trade. It will also generate more information about the trading activity in these critical markets, enhancing the ability of the SEC to oversee them. It is an important and necessary step. Taken together with several other recent proposals from the SEC, which are described in our letter, our Treasury markets will preserve their solid footing as one of the most important—and dependable—financial markets in the world.
Bottom Line. This proposal is part of a worthwhile regulatory effort to create a more durable solution to the lack of transparency and the risk of instability associated with the U.S. Treasury markets, so that dramatic interventions in moments of crisis – such as those we witnessed in March 2020 – are no longer necessary.
Read our full comment letter here.