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December 13, 2023

Today’s SEC Treasury Market Rule Is a Big Win for Investors, Markets, Market Participants, Transparency, and Financial Stability

WASHINGTON, D.C.—Today, the U.S. Securities and Exchange Commission (SEC) adopted final rules requiring more central clearing of trades in U.S. Treasury securities. Legal Director and Securities Specialist Stephen Hall released the following statement:

“Massive intervention by the Federal Reserve in early 2020 as the pandemic hit prevented chaos in the $26 trillion U.S. Treasury securities markets from becoming a crisis and a crash requiring an even greater bailout.  As speculators, leverage, trade speed, and new market participants all dramatically increase in those critical markets, it is imperative to increase transparency and regulation to prevent future chaos, crises, crashes and bailouts, which is what the SEC’s rule does.

“U.S. Treasury markets serve as a cornerstone of the U.S. and global financial markets, yet they remain too vulnerable to instability and a lack of transparency.  The rule the SEC adopted today will help address those concerns by ensuring that more trading in U.S. Treasury securities is routed through central clearing agencies, key financial shock-absorbers in our market structure.  The rule will substantially increase the number of transactions in U.S. Treasury securities that are centrally cleared by requiring that clearing agencies providing clearing and settlement services in U.S. Treasury securities transactions require their members to submit most secondary market transactions in U.S. Treasury securities for clearing.  The result will be reduced counterparty risk for market participants, enhanced transparency, less volatility, and more data for regulators to analyze and manage risk and financial stability.  That will benefit investors, markets, market participants, financial stability, and ultimately the entire economy.

“As a result, the SEC’s action today is an important step in the effort to modernize and enhance regulatory oversight of the U.S. Treasury securities market in light of recent market evolutions and disruptions.  The SEC has also proposed other critical rules as part of this effort, such as rules that would require the principal trading firms that perform a majority of the trading in Treasury markets to register with the Commission as a dealer.  Of course, those other rules do not address central clearing of Treasury securities specifically, and that’s why the rules that SEC adopted today are so important as one element of a group of reforms necessary in the Treasuries market.”

See our comment letter for more information.

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.

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