A Rewiring of the World’s Biggest Bond Market Will Transform Trading

After years of regulatory tinkering, Washington is now forcing through the most rigorous overhaul of the world’s biggest bond market in decades.

Securities and Exchange Commission Chair Gary Gensler, who once oversaw federal debt management at the US Treasury, has championed a move to require the vast majority of Treasuries trading to migrate to a central counterparty clearinghouse — an intermediary between buyers and sellers that assumes ultimate responsibility for the transaction.

The phased-in process culminates in mid-2026 with the inclusion of all repurchase agreement transactions — a key tool used by hedge funds in the popular so-called basis trade that’s drawn scrutiny from Washington.

Gensler Photographer: Andrew Harrer/Bloomberg

Gensler Photographer: Andrew Harrer/Bloomberg

The initiative amounts to one of the most consequential efforts since a regulatory revamp in the wake of a 1991 Treasury auction scandal involving the now-defunct Salomon Brothers. Once complete, it should minimize the danger of contagion from a shock collapse of any one financial institution. It’s akin to what authorities already did with interest-rate derivatives after the downfall of Lehman Brothers, which wreaked havoc in global money markets.