The Municipal Finance Authority (MFA) has voiced strong opposition to proposed changes to the Fixed Income Clearing Corporation's (FICC) Government Securities Division (GSD) rules. In a comment letter, the MFA urges the FICC to withdraw its proposal, arguing that it would harm competition and increase costs in the Treasury markets.
The MFA highlights the proposal's requirement for FICC netting members to exclusively clear all eligible secondary market transactions through FICC. This, they contend, would stifle competition by hindering the ability of new clearing agencies to gain registration with the Securities and Exchange Commission (SEC). The resulting monopoly, the MFA warns, would create a dangerous concentration of risk within the Treasury markets.
The letter also criticises the proposed ongoing membership requirements, deeming them unnecessary, costly, and an inappropriate barrier to FICC membership. Notably, the FICC proposal mandates that its members conduct independent reviews to confirm they are clearing all eligible trades through the FICC. No other clearing agency has a similar requirement.
"The ill-conceived FICC proposal threatens the well-being of the Treasury markets â the bedrock of the global financial system," stated Bryan Corbett, President and CEO of the MFA. "The proposal should be withdrawn as it creates concentration risks, stifles competition, and drives up costs in Treasury markets."
The MFA's full comment letter can be accessed [here](https://mfaalts.mmsend.com/link.cfm?r=_nnA9OUCBr999eU52wpvBw~~&pe=KZOvJvjz1evCE7zKs8hMsxDMUN9w128SpPPXVu5KhAtsJnhcpLAfKyigEXAQTWZ-26NVeFg74r2iy5raDB8yNQ~~&t=gAfeuiA-oOfzQevZ3s7CRg~~).
The MFA's rejection of the FICC's proposed rule changes raises significant concerns about the future of competition and cost in the Treasury markets. Whether the FICC will ultimately withdraw its proposal in light of this opposition remains to be seen.
