US SEC’s Gensler welcomes competition on multiple clearing houses for Treasuries

By Davide Barbuscia

(Reuters) – Gary Gensler, chair of the Securities and Exchange Commission, said on Wednesday he welcomed competition around having multiple clearing houses for U.S. Treasuries, though he said there was no formal filing from potential applicants.

Currently, the Fixed Income Clearing Corporation, a subsidiary of trade processor DTCC, is the country’s sole clearer of Treasuries. But competition is set to increase after the U.S. Securities and Exchange Commission in December adopted new rules aimed at reducing systemic risk in the U.S. Treasury market by forcing more trades through clearing houses.

London Stock Exchange Group (LON:)’s Clearing House (LCH) business has expressed interest in expanding into clearing U.S. Treasuries, as well as CME Group (NASDAQ:) and Intercontinental Exchange (NYSE:).

Speaking to reporters on the sidelines of the ISDA/SIFMA Treasury Forum in New York, Gensler said he generally welcomed competition. “There’s some dialogue between potential applicants,” he said, but added there was no formal filing yet.

Any potential application would have to adhere to robust rules around risk management and access, he also said.

The Treasuries market is one of the most liquid in the world, and the global financial system uses Treasuries as a benchmark for other asset classes. But it has seen liquidity issues, such as in March 2020, when pandemic fears caused disruptions and liquidity rapidly deteriorated.

DTCC said earlier this week that the recently adopted U.S. Treasuries clearing rules, which will become effective in phases by June 2026, could increase clearing activity by the Fixed Income Clearing Corporation by more than $4 trillion per day.

It cited a survey completed by 83 sell-side institutions. FICC currently clears some $7 trillion worth of Treasuries per day.