MNI BRIEF: US Treasury Says Central Clearing Appears Promising

Treasury Department undersecretary for domestic finance Nellie Liang Wednesday said reforms in the Treasury market to expand central clearing appear promising in terms of potential improvements in efficiencies from netting across all counterparties, but cautioned it could concentrate risk.

"These benefits vary across market segments," she said, noting it is a reform option at an earlier stage of consideration relative to proposals to improve transaction data. "The capital efficiencies from netting likely are larger for repo than for cash securities transactions. In addition, consideration has to be paid to potential higher costs of participating in the market, the potential risks of expanded central clearing, such as increased concentration of risk at the central counterparty."

Other regulators have signaled openness to central clearing in Treasury markets. Securities and Exchange Commission Chair Gary Gensler said earlier Wednesday central clearing doesn't eliminate risk but it does lower it, adding that he has asked staff to look at proposals.