Flash Boys Trading Treasuries Poised to Face New SEC Rules

(Bloomberg) -- Securities and Exchange Commission Chair Gary Gensler is calling for much tougher regulation of the high-frequency trading firms that are responsible for a major chunk of transactions in U.S. Treasuries. 

Gensler said Wednesday that many of the firms haven’t registered with the agency and aren’t reporting their Treasury trades to regulators. Additional scrutiny of the firms would make the market more resilient, he said.

“It’s time for us to close the regulatory gap and ensure we have regulatory oversight,” he said in remarks prepared for the New York Federal Reserve’s U.S. Treasury Market Conference. “Requiring all firms that significantly trade in this market to register as dealers with the SEC also could help level the playing field in this market.”

Since taking over the agency in April, Gensler has called for dozens of possible rule changes, including revisions that would bring more transparency to the Treasury market. He said on Wednesday that in addition to looking at high-frequency trader registrations, he’s also asked the agency’s staff to consider more regulations for electronic platforms where government debt is bought and sold and a bigger role for clearinghouses. 

In his remarks, Gensler said that only 13% of Treasury cash transactions are centrally cleared and that he’d directed the agency’s staff to review the situation and study whether changes were needed. Gensler also said he’s asked officials to work with other regulators on improve the TRACE trade-reporting system and consider possible changes to disclosure forms that hedge funds must confidentially submit to the regulator. 

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