SEC Commissioner Elad L. Roisman urged financial regulators to consider the benefits of applying certain elements of the SEC's oversight of the equity market to the market for U.S. government securities.
In a speech at the U.S. Treasury Market Conference, Mr. Roisman said he was not suggesting that the SEC apply the same rules to equities as to government securities. He questioned whether certain types of equity rules might be relevant to other asset classes.
Mr. Roisman highlighted, for example, several potential benefits for the SEC to apply aspects of Regulation Alternative Trading Systems ("Reg. ATS") to U.S. Treasury venues. Mr. Roisman argued that the benefits of applying Reg. ATS to the market for government securities would be:
- strengthening the public markets for government securities;
- fair access for subscribers to government securities trading venues; and
- creating a more resilient system of U.S. Treasury venues by requiring operators to establish current and future capacity estimates, as well as scheduled capacity stress tests of critical systems.
In addition, Mr. Roisman urged the SEC to take into account whether ATS-N requirements should apply to U.S. Treasury ATSs and whether SEC Regulation Systems Compliance and Integrity should apply to either all or some of the U.S. Treasury venues.
Commentary Steven Lofchie
It is a fundamental law of financial regulation that any regulation applied to equity securities eventually must be applied to all other asset classes. The only variable is the extent of the delay. This is not to say, as Commissioner Roisman observes, that the application of the equity rules is fundamentally good or bad in any particular situation - only that it is inevitable, at least on a big-picture level.
In the case of government securities, broker-dealers in those instruments were not required to register until the adoption of the Government Securities Act of 1986 (fifty years after the adoption of the Securities Exchange Act). At first, the regulation that applied to government securities and dealers therein was materially less than that applied to other firms. This was based on the theory that a heavy cost of regulation would raise costs in the government securities markets. Gradually, the regulation of government securities, and of debt securities generally, has become more equity-like.
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