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Hedge Funds Facing Tighter SEC Clearing Rules for Treasuries

  • SEC wants proprietary and high-frequency firms to clear trades
  • Repo market trades would face the SEC’s new requirements
Gary Gensler

Gary Gensler

Photographer: Al Drago/Bloomberg
Updated on

Hedge funds would have to start centrally clearing many of their transactions in US Treasuries under a new regulatory plan designed to protect against a market meltdown.

The Securities and Exchange Commission on Wednesday voted unanimously in favor of proceeding with a plan to give clearinghouses -- which sit between buyers and sellers and ultimately backstop the transactions -- a much bigger footprint in the $24 trillion dollar market for American government bonds. The draft regulations would make trading safer and limit the chance of any single firm harming the broader financial system, according to the SEC. If finalized, the regulations would represent a significant overhaul for the market and are likely to draw pushback from parts of Wall Street.