It would also represent a significantly greater role for the Fixed Income Clearing Corp., a subsidiary of the Depository Trust & Clearing Corp. The group is currently the only clearinghouse for Treasuries securities. The DTCC has been urging the government to require more parties to centrally clear their Treasuries transactions and in a statement on Wednesday said it would evaluate SEC’s proposal.
Only about 13% of Treasury cash trading was centrally cleared in 2017, according to a 2021 government report. Proprietary trading firms, which generally don’t participate in central clearing, account for about 60% of Treasury trading volume on interdealer platforms, according to a 2021 report by the DTCC, which cited Federal Reserve data.
The proliferation of high-frequency trading firms and proprietary trading firms has meant that far fewer Treasuries transactions are centrally cleared compared to two decades ago, the SEC said in a statement.
The regulator will take public comment for at least 60 days on the proposal and consider feedback it receives. The SEC may then revise the proposal before holding a second vote to finalize the regulation several months from now.
--With assistance from Christopher Condon and Benjamin Purvis.
This article was provided by Bloomberg News.