Gensler: SEC to focus on repo clearing, making Principal Trading Firms register as dealers

Testimony of Gary Gensler
Before the United States Senate Committee on Banking, Housing, and Urban Affairs Sept. 14, 2021
Washington, D.C.

Treasury Market

First, let me turn to the Treasury market. This $22 trillion market5 is integral to our overall capital markets as well as to global markets. It is the base upon which so much of our capital markets are built. Treasuries are embedded in money market funds; myriad other markets and financial products are priced off of Treasuries; and they are an essential part of our central bank’s toolkit. They are called the “risk-free asset” not just here in the U.S. but globally. They are how we, as a government and as taxpayers, raise money: we are the issuer.

During the start of the Covid crisis, liquidity conditions in the Treasury market deteriorated significantly. This wasn’t the first time we observed challenges in this market, though. Back in October of 2014, there was the Treasury “Flash Crash.” In the fall of 2019, we had significant dislocations in Treasury funding markets, called the Treasury repo market.

I’ve asked staff to work with our colleagues at the Department of the Treasury and the Federal Reserve on how we can better enhance resiliency and competition in these markets.

To the extent that this market is more efficient, that could potentially save money for U.S. taxpayers and lower the cost of our debt. To the extent that this market is more resilient, it is less likely to add to systemic risks during times of stress.

We will seek to consider some of the recommendations that external groups, like the Group of Thirty 6 and Inter-Agency Working Group for Treasury Market Surveillance,7 have offered around potential central clearing for both cash and repo Treasuries.

Further, I’ve asked staff to reconsider some initiatives on Treasury trading platforms, and also to consider how to level the playing field by ensuring that firms that significantly trade in this market are registered as dealers with the SEC.

The full testimony is available at

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