US SEC proposes new Treasury market reforms next week

US SEC proposes new Treasury market reforms next week

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WASHINGTON, Sept. 7 (Reuters) – The U.S. Securities and Exchange Commission (SEC) will propose draft rules on Sept. 14 to reform the way U.S. Treasuries are traded and settled, according to a statement released Wednesday by the agency.

US regulators have been working to reform the structure of the $23 trillion Treasury market after a number of liquidity crises, including a market collapse when the COVID-19 pandemic shut down the US economy in March 2020. Reserve to get in and buy Treasury bills.

As government debt continues to grow and the capacity of treasury traders remains limited, the treasury market remains highly vulnerable to further dysfunction under stress, regulatory experts including former Treasury Secretary Tim Geithner warned in a report this year.

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With the Fed embarking on “quantitative tightening” in June and letting its Treasuries reach maturity without buying more, the market has seen wild price swings, Reuters reported last month. read more

The Treasury market is the world’s largest bond market and serves as a global benchmark for many other asset classes, making price volatility particularly worrying.

The SEC’s statement said the agency would consider changes to certain clearing rules for treasury market participants, without providing details. Central clearing involves sending trades to a clearing house, which requires both counterparties to put in cash to guarantee the execution of the trade in the event that either one defaults.

SEC Chairman Gary Gensler has argued in the past for expanding centralized clearing of Treasury bills based on increasing resilience by bringing additional capital to the market during times of stress.

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