BNY Mellon warns about Treasury market functioning risks as key reform looms

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Celebrating Wild Caraway: Taste of Nova Scotia's Restaurant of the Year | SaltWireNEW YORK - A key reform proposed by the U.S. Securities and Exchange Commission to boost the use of central clearing in the Treasury market would need to be implemented over an extended period to avoid disruptions at a time of already turbulent market dynamics, BNY Mellon said on Wednesday.

Under the rule, more trades would be sent to a clearing house, requiring counterparties to put up cash to guarantee execution in the event of defaults. "We're in a period when the Treasury market needs to be relied upon for its safety and liquidity," Nate Wuerffel, head of market structure at BNY Mellon, said in an interview.

Liquidity crunches in recent years have raised regulatory concerns about the Treasury market's ability to function during times of stress. Notably, in March 2020 the market seized up as pandemic fears gripped investors, prompting the Federal Reserve to buy Treasuries to support the market.

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BNY Mellon warns about Treasury market functioning risks as key reform loomsA key reform proposed by the U.S. Securities and Exchange Commission to boost the use of central clearing in the Treasury market would need to be implemented...
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