U.S. Sen. Tim Scott (R-SC), ranking member on the Senate Banking Committee, is urging the SEC to rescind two rules that would expand the types of entities required to register as securities dealers.
Scott called the rules overly vague and lacking in economic analysis. He also said they will reduce liquidity in U.S. Treasury markets.
“The SEC’s proposals contemplate the imposition of new, broad, and sweeping changes to the criteria for determining which market participants are required to register as dealers with the SEC, and therefore would significantly alter the existing relationship between dealers and those that purchase securities in the secondary market,” Scott wrote in a letter to SEC Chair Gary Gensler.
The proposed rules are titled, “Further Definition of ‘As a Part of a Regular Business’ in the Definition of Dealer and Government Securities Dealer.” He said this proposal would impose sweeping changes to the criteria for determining which market participants are required to register as dealers with the SEC. That, in turn, would significantly alter the existing relationship between dealers and those that purchase securities in the secondary market, Scott added.
“I am especially concerned that the additional compliance burdens and costs associated with registering with the SEC as a dealer may cause some market participants to exit the Treasury market entirely. Decreased participation in our Treasury markets will cause wider bid-ask spreads, which inherently lead to the inefficient pricing of Treasuries. Fewer participants in the Treasury markets will also lead to a potentially dangerous reduction in liquidity in those markets. These are risks we cannot afford to take,” he said.
Scott concluded by urging Gensler to rescind these proposals.