Off target: SEC dealer rule will hurt those it aims to protect

It was one of the most significant shocks to the US Treasury markets in decades – the early days of the Covid pandemic. Bid/ask spreads widened dramatically, and market depth deteriorated to levels not seen since the 2008 global financial crisis. People asked: will non-bank entities step in and support the markets?

In March and April 2020, DRW’s market share across all maturities of Treasury futures – where liquidity was especially essential – increased by an average of 60% over the previous 12 months.

But our ability to do this – and the ability of others like us – would have looked much different if non-dealers had been subject to a new proposed dealer rule from the US Securities and Exchange Commission, which would greatly expand the number of firms required to register as dealers with the agency.

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