Gensler Delivers Remarks on Fixed Income Markets

SEC Chair Gary Gensler delivered remarks virtually at City & Financial Global’s City Week 2022 conference in London and focused on the importance of reforming fixed income markets as they become increasingly electronic. He noted that the $50 trillion U.S. fixed income markets are larger than the $23 trillion equities markets, and the non-Treasury fixed income markets are close to $30 trillion which is two and a half times larger than commercial bank lending. Additionally, Gensler stated “a greater share of bond ownership has shifted to registered investment companies, like mutual funds, money market funds, exchange-traded funds, and closed-end funds. This shift raises challenges for financial resiliency.” One area for improvement Gensler focused on during his speech is post-trade transparency of individual transactions such as data on price and the spread to the underlying markets that is available in real-time or near real-time to when the trade is executed. Gensler stated currently trades are reported as soon as practicable, but no later than 15 minutes after execution, and inquired whether “the outer bound be shortened to no later than, for example, 1 minute.” He also opined foreign sovereign debt bonds could be added to the TRACE bond reporting system. Other suggestions Gensler detailed include revising SEC rules to reflect the increased use of fixed income electronic trading platforms, asking SEC staff for recommendations on strengthening central clearing of Treasuries for both cash and repos, shortening the settlement cycle, as well as the previously published money market fund rule proposal.