November 17, 2021

SEC and Treasury Officials Recommend Strengthening Treasury Market Protections

SEC Chair Gary Gensler and Treasury Under Secretary Nellie Liang commented on potential changes to Treasury market oversight at the U.S. Treasury Market Conference. Both Mr. Gensler and Ms. Liang spoke in response to the recent Interagency Working Group on Treasure Market Surveillance ("IAWG") report, which put forth common themes of market disruption,and principles to guide policymaking in the Treasury market.

Mr. Gensler emphasized the need for greater oversight of principal trading firms, including the registration of all significant traders with the SEC to provide equal footing for firms in the market. He also sought the registration of Treasury trading platforms themselves, tying uniform registry to the IAWG report's call for greater transparency in the Treasury market. Mr. Gensler addressed the role of clearinghouses in lowering systemic risk, seeking further centralization of the clearing process to minimize risk and increase competition. Further, Mr. Gensler pointed to the IAWG report's recommendation to expand clearing centralization, including by bringing in request-for-quote and interdealer broker platforms to a central clearing process.

Ms. Liang also spoke about the current state of the Treasury market, focusing on the recent issuance of Treasury debt during COVID-19 and the changing trade strategy and technology that could threaten market liquidity. Ms. Liang pointed to recent market disruptions as evidence that demand for liquidity can rise without market intermediaries being willing or able to meet that demand. She highlighted disruptive events as potentially impairing the functioning of the Treasury market and destabilizing its role in supporting the government and financial system generally. Ms. Liang also listed some early steps toward implementing the IAWG report's principles, including new repo facilities aimed at reducing liquidity pressures, and closer cooperation with FINRA and banks on transaction data collection to increase data availability and visibility by the governmental sector.

Mr. Gensler and Ms. Liang emphasized the reliability and liquidity of the market as key strengths, and framed their proposals as reinforcing a stable financial system. With the IAWG report as a framework, they both called for further progress on improving transparency and oversight in the Treasury market.