Treasuries May Get ‘Reg ATS’d’


About two decades ago, the U.S. Securities and Exchange Commission opted not to regulate platforms that solely traded government securities. However, the market regulator is reconsidering its position, with the backing of at least one platform operator.

“Platforms for government securities were excluded from Regulation ATS at the time in deference to the joint regulation schema for government securities, which the SEC shares with the Department of the Treasury and the federal banking regulators,” said SEC Chair Mary Jo White in her keynote for The Evolving Structure of the U.S. Treasury Market conference, hosted by the Federal Reserve Bank of New York.

Chair White has instructed SEC staff to develop recommendations that would enhance the SEC’s regulation of such platforms for the Commission to consider.

Mary Jo White, SEC

Mary Jo White, SEC

“I expect these recommendation to address whether and how to apply the various provisions of Regulation ATS and Regulation SCI to platforms that currently trade government securities,” she said. “Application of Regulation ATS provisions, as recently proposed to be amended, would serve to enhance regulatory oversight of US Treasury trading platforms and improve the transparency of operations and protections for investors while promoting a fair and competitive market for trading US Treasury securities. Application of Regulation SCI to these systems would also significantly strengthen US Treasury market infrastructure and enhance its resilience.”

Implementing a Regulation ATS-like regime in the US Treasury market would be seen in a positive light, noted Nasdaq CEO Bob Greifeld, during Nasdaq’s third-quarter earnings call.

Nasdaq operates the electronic US Treasury trading platform eSpeed, which the exchange operator acquired from BGC Partners in 2013.

Despite banks reporting good fixed income trading results recently, Greifeld noted that the primary reference points for the US Treasury market — The Fed’s primary dealer Treasury Bond volume, the CME’s government bond futures contracts, and inter-dealer fixed income platforms— remain flat or down.

“We are still dealing with a difficult macro environment,” he added.

To further boost Nasdaq’s fixed-income business, the company appointed John Shay as senior vice president and global head of fixed income and commodities in September. Shay most recently served as senior vice president for global markets at electronic market-maker Virtu Financial.

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