December 22, 2022

Submitted electronically via SEC.gov
Vanessa Countryman, Secretary
Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-1090

Re: File No. S7–23–22
Standards for Covered Clearing Agencies for U.S. Treasury Securities and Application of the Broker-Dealer Customer Protection Rule With Respect to U.S. Treasury Securities

Dear Ms. Countryman:

The Securities Industry and Financial Markets Association (“SIFMA”)1 and the Institute of International Bankers (“IIB”)2 appreciate the opportunity to comment on the proposal of the Securities and Exchange Commission (the “Commission”) on Standards for Covered Clearing Agencies for U.S. Treasury Securities and Application of the Broker-Dealer Customer Protection Rule With Respect to U.S. Treasury Securities (the “Proposal”).3

I. Executive Summary

SIFMA and IIB recognize the risks in the U.S. Treasury (“Treasury”) market, in particular the liquidity problems exemplified by the “flash rally” of 2014, the Treasury repo market stress of September 2019, and the COVID-19 shock of March 2020. We also agree that benefits exist to central clearing in certain situations. The cited benefits of increased central clearing in the Treasury market—increasing liquidity, resilience and intermediation capacity—have not yet, however, been sufficiently proven to outweigh potential costs of a broad central clearing requirement for secondary market transactions in Treasury securities (“Treasury Transactions”). The Proposal may, in fact, risk decreasing liquidity if market participants reduce activity or leave the market and increasing concentration at the Fixed Income Clearing Corporation (“FICC”), the only current clearing agency that provides central counterparty services for transactions in Treasury securities (a “Treasury CCP”).

1 SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit https://www.sifma.org.

2 IIB is the only national association devoted exclusively to representing and advancing the interests of the international banking community in the United States. Its membership consists of internationally headquartered banking and financial institutions from over 35 countries around the world doing business in the United States. The IIB’s mission is to help resolve the many special legislative, regulatory, tax and compliance issues confronting internationally headquartered institutions that engage in banking, securities and other financial activities in the United States. For more information, visit https://www.iib.org.

3 See 87 Fed. Reg. 64,610 (Oct. 25, 2022).