MNI: NY Fed’s Neal Wants Treasury Central Clearing Done Right

Supervisors and market participants must work together to ensure that changes aimed at boosting Treasury market transparency and resilience, such as central clearing, are implemented in ways that deliver the intended benefits of greater stability, Head of the New York Fed Markets Group Michelle Neal said Wednesday.

“Increased central clearing offers several benefits,” she said in prepared remarks. “For the benefits of central clearing to be realized, however, it is critical that any central counterparty be well supervised and have robust risk management practices. The importance of strong CCP risk management only increases with the volume of transactions that flow through that CCP.”

(See MNI: US Treasury Clearing To Limit Contagion, Create New Risks)

“As the SEC’s central clearing rule is implemented, it will be crucial to carefully monitor market dynamics and track Treasury market liquidity and functioning. Additionally, as Treasury market structure undergoes this transition, market participants should remain cognizant of, and follow, best practice recommendations, which support the integrity and efficiency of this critical market.”