The Securities Industry and Financial Markets Association (SIFMA) issued a response to the Securities and Exchange Commission’s (SEC) proposal related to requirements for clearing agencies for U.S. Treasury securities transactions.
SIFMA, along with the Institute of International Bankers (IIB), recommends that rather than moving directly to the implementation of a broad central clearing requirement for Treasury transactions, the SEC follows a more incremental and calibrated process.
“U.S. Treasury securities are the underlying currency of the financial markets Market participants need to have confidence in the structure of this market, that it is fit for purpose, that it will do what people expect it to do and that it can finance the government at low cost,” Kenneth Bentsen, Jr., SIFMA president and CEO, said. “SIFMA supports the broad policy objective of enhancing the resiliency and capacity of the Treasury market through carefully calibrated reforms that encourage market participation from a diverse group. However, we believe other actions to strengthen the market—either those which have already been proposed or initiatives such as infrastructure builds, incentives, and further study—should be pursued before further reforms are enacted so as to minimize unintended negative outcomes for market participants and broader market resilience.”
In a letter to the SEC, SIFMA proposes several steps to ensure that the SEC and the market are able to analyze the impacts of additional clearing of Treasury transactions on each segment of the Treasury market.
Specifically, SIFMA suggests increasing incentives for buy-side and sell-side participants to centrally clear Treasury transactions; conducting further study and analysis on the costs and benefits of central clearing across market segments and participant types; implementing a targeted clearing requirement if supported by further study; and phase in any clearing requirement.
“These steps will ensure that the Commission and the market are able to analyze comprehensively the impacts of additional clearing of Treasury Transactions on each segment of the Treasury market and determine whether the benefits to any central clearing requirement outweigh the costs,” SIFMA stated in its letter to the SEC.