- SEC chair Gary Gensler announced plans to redefine “exchange” and alternative trading systems to enhance the Treasury bond market.
- Treasury trading platforms must register as broker-dealers under Regulation ATS.
- New FINRA rules will require detailed public disclosures of Treasury trades, improving market transparency.
According to Chair Gary Gensler, speaking at the U.S. Treasury Market Conference on September 26, the U.S. Securities and Exchange Commission is going to retroactively redefine what constitutes an “exchange” and, for that matter, an alternate trading system.
The comments came from a session entitled “From Hamilton to Yellen,” in which he emphasized how to make the U.S. Treasury bond market more efficient and resilient. However, many in the digital asset community have resisted that move.
Gensler outlined that the SEC aims to adapt its regulatory framework to the evolution of the Treasury markets, which have significantly transformed with the rise of electronic trading.
He mentioned the authentication of trading platforms offering Treasury trades as broker-dealers, applying the Regulation Alternative Trading System (ATS). When Arthur Levitt was leading the SEC in 1998, this regulation was formed, and Treasury trading platforms were exempted at that time.
SEC Enhancements in Post-Trade Transparency
The proposed changes would require platforms that handle substantial volumes in Treasury trading to comply with Regulation Systems Compliance and Integrity. This would ensure that the technology underpinning these platforms is resilient, safeguarding the overall market infrastructure.
Moreover, the Fair Access Rule would mandate equitable access to these platforms, preventing unfair denials or limitations for participants. Gensler also touched on transparency, highlighting recent enhancements to post-trade transparency in the Treasury markets through a Financial Industry Regulatory Authority (FINRA) rule change.
This update, which allows for detailed trade data to be publicly available on a trade-by-trade basis, marks a significant shift from the previously aggregated disclosures. The specifics shared with the public will include each trade’s time, price, direction, venue, and size, bolstering the market’s transparency and accountability.
In addition, the proposed rule amendments to FINRA will be made in order to further facilitate the process of broker-dealer registration in simplifying oversight across various market segments. Such an approach may favor the rebuilding of integrity and effectiveness in the capital markets against modern challenges imposed by today’s trading practices.
Reflecting on the history of the U.S. Treasury markets, Gensler noted influential figures from Alexander Hamilton to Janet Yellen and emphasized constant change. He told them, “These changes are essential to the Treasury market’s stability and resiliency, important not just to taxpayers, but to the overall capital markets and monetary policy, in turn underpinning the dollar’s global role.
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