The Securities and Exchange Commission has imposed new rules that will require many private funds to register with the agency as dealers, a move regulators say will help them better monitor the sometimes volatile market for U.S. government debt.
“When traders register, they are subject to a variety of important laws and rules that help protect the public, promote market integrity, and facilitate capital formation,” Gensler, the SEC chairman, said Tuesday. “Among these are meeting minimum capital requirements and reporting data to
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The rule follows another adopted in December that will force more government debt transactions to be cleared centrally and is part of a broader effort by the Biden administration to stabilize the Treasury market.
However, the private fund industry, high-frequency trading firms and their allies in Congress expect that this rule may prompt some investment firms to flee the market to buy US Treasuries, leading to further instability.
Sen. Bill Hagerty of Tennessee and Rep. French Hill of Arkansas, both Republicans, expressed these concerns in a letter to Gensler last year, writing that the new rule would only “exacerbate” a recent trend of market liquidity pressures for the U.S. government. religion.
The private funds industry is taking an increasingly combative stance toward the Securities and Exchange Commission. The Managed Funds Association, which represents alternative asset managers, has led two lawsuits against the SEC over rules related to short-selling disclosures and another rule requiring private equity funds and hedge funds to disclose quarterly performance, fees and expenses.
The Securities and Exchange Commission (SEC) has relaxed the rule from the initial 2022 proposal, removing a provision that anyone who traded more than $25 billion in Treasury securities in four of the last six calendar months would have to register as a broker-dealer.
Brian Corbett, CEO of the Department of State, praised the SEC for dropping the quantitative trigger in a statement on Tuesday, but said its members may still be unfairly affected.
“The State Department will continue to review the final rule to evaluate whether our members’ investment activities are harmed by the commission’s trader definition. Alternative asset managers are not dealers, and the State Department is concerned that the rule may not go far enough in excluding them and private funds from,” Corbett said. Organization as dealers.
The agency expects the rule will require up to 43 entities to register, according to SEC officials.
The cryptocurrency industry is also sounding the alarm that a change in the legal definition of a securities “dealer” could include a wider range of cryptocurrency traders who provide liquidity on decentralized digital asset exchanges.
