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Regulation of Treasuries trading needs update, SEC's White says
[WASHINGTON] The top US financial regulator called for new oversight and risk controls on high-frequency traders that invest in Treasuries, saying rules haven't kept pace with electronic strategies that now dominate the market.
Securities and Exchange Commission Chair Mary Jo White said Tuesday that regulators should "seriously reevaluate" the lax oversight of speed-trading firms that account for more than 50 per cent of trading in Treasuries on electronic platforms. Regulators should require that firms report their trades and restrict trading that can disrupt stressed markets, she added.
Treasury yields plunged the most in five years on Oct 15, 2014, before recovering, fueling a months-long debate over the structure of a US$13 trillion market that most investors consider a safe haven. The harrowing swings resulted in part from banks and high-frequency traders, US authorities said in a report released in July.
"It is essential that our collective regulation of this critical market keeps pace with dramatic changes in the Treasury market," White said Tuesday.
Trading in Treasuries increasingly resembles the highly automated, high-speed world of stock trading, White told a conference sponsored by the Federal Reserve Bank of New York. While not endorsing every aspect of US equity market structure for Treasuries, White said rules intended to curb excessive volatility could be useful in the Treasury market.