Press Releases

Today, the House Financial Services Committee is holding a Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity hearing, led by Task Force Chairman Frank Lucas (OK-03), to examine the critical role derivatives play in managing risk in the Treasury market.

Read Task Force Chairman Lucas' opening remarks as prepared for delivery:

"Welcome to today’s Task Force hearing examining derivatives’ role in the Treasury market. Thank you to our witnesses for providing their invaluable expertise.

"The Treasury market is the deepest, most liquid, most important market in the world. Today we’re discussing an aspect of the Treasury market that continues to grow in popularity and raises important questions ahead of anticipated market structure changes and capital rulemaking. 

"Part ofthe depth and liquidity of the Treasury market is driven by trading on swaps, options, and futures on the underlying cash Treasury.

"These derivatives markets are key to managing risk. They allow market participants to hedge their exposures, creating demand for Treasuries, increasing market liquidity, and supporting price discovery and health of the broader Treasury market. 

"As a recent paper from the Chicago Fed has pointed out: “enhanced liquidity in the derivatives market strengthens the functioning of the cash market” and “the enhanced liquidity supports more stable, lower-cost public financing.”

"It’s important that Congress continues to support the resilience of the Treasury derivatives markets as these instruments are so closely linked to the bedrock of the global financial system. 

"We must especially pay attention now as the industry undergoes a fundamental market structure shift with the looming deadlines for central clearing of Treasury cash and repo in December and next June, respectively.

"The SEC, under the leadership of Chairman Atkins, has been responsive to industry comments and proposals to make sure the transition to mandatory clearing causes no disruptions in the Treasury market. A recent example includes the approval of two additional CCPs, increasing customer choice and competition while reducing concentration risk. 

"Demand for Treasury derivatives is rising and with it demand for cash and for clearing. It is absolutely critical that our capacity for clearing these transactions rises in kind. 

"Last week the SEC and CFTC also granted exemptive relief to allow customer cross-margining of off-setting exposures of cash and futures positions for Treasuries. 

"This is a welcome step to ease the transition to mandatory clearing, and as witness testimony has pointed out, will allow the redeployment of capital back into our Treasury markets. 

"I’m hopeful that all this risk-reducing activity will be fully recognized in the capital rules proposed by the bank regulators as we discussed yesterday in the full committee hearing on the topic. 

"We have substantial data and experience on the benefits of clearing from a risk management and margin efficiency standpoint due to its use in derivatives markets, but getting the transition right to the broader Treasury market will take Congress, the regulators, and the industry working in lock step together. 

"I look forward to our discussion today. I yield back."

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