NY Fed's Williams: Shift to Central Clearing for US Treasuries Is Accelerating
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New York Federal Reserve President John Williams stated that the transition of US Treasury securities and repurchase agreements to central clearing is progressing ahead of schedule. He noted that the industry is expanding infrastructure for cleared repo and cash transactions in anticipation of upcoming regulatory deadlines, with activity shifting from the non-cleared market to the cleared market. The transition requires eligible secondary market Treasury trades, repos, and reverse repos to be cleared through a central counterparty (CCP). Williams reaffirmed that the Fed's current framework of maintaining an 'ample' level of bank reserves has proven 'very effective' in keeping market rates stable within the Fed's target range and supporting normal financial market functioning. He stated the Fed is committed to maintaining an elastic supply of reserves and will adjust supply over time to match any shifts in reserve demand due to regulatory changes or market structure adjustments. Williams did not comment on FOMC monetary policy.
Source report
New York Federal Reserve President John Williams stated that the transition of U.S. Treasury securities and Treasury repo agreements to central clearing is progressing ahead of schedule.
"In response to upcoming regulatory deadlines, the industry has begun expanding infrastructure for cleared repo and cash transactions, with activity shifting from the non-cleared market to the cleared market earlier than anticipated," Williams said.
The transition requires that eligible secondary market transactions in U.S. Treasuries, as well as repo and reverse repo agreements, be cleared through a central counterparty (CCP).
Williams reiterated that the Federal Reserve's current framework of maintaining an "ample" level of bank reserves has proven "very effective" — both in keeping market interest rates stable within the Fed's target federal funds rate range and in supporting the normal functioning of financial markets.
He stated that the Fed is committed to maintaining a resilient supply of bank reserves.
"If the underlying demand for reserves shifts due to regulatory changes, market structure adjustments, or any other reason, the Federal Reserve will adjust reserve supply over time to match that change," Williams noted.
Williams did not comment on the Federal Open Market Committee's (FOMC) monetary policy.
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NY Fed’s Williams: Treasury clearing transition ahead of schedule, reserves framework effective