BNY's Brian Ruane on new SEC rule

Thank you Isabelle. It's great to be here at the NYSE. There's a lot going on in the fixed income markets today — whether it's in corporate trust, where we are the largest provider of services to the debt capital markets and our platforms are used by both structured debt and conventional debt issuers; our collateral management platform, where we service in excess of $5 trillion of financing transactions, a substantial portion of which is US Treasuries; or in our credit services business, where we support our clients from a credit perspective and participate in debt and equity capital markets tranches. Our overall company services in excess of $50 trillion of client assets, where we help manage it, move it, and keep it safe. Approximately two-thirds of that $50 trillion is fixed income, so we do see a lot of transactions in the fixed income market.

So the new SEC rule — first, a backdrop to the US Treasury market. If we go back to COVID, the Treasury market was between $17 and $18 trillion in outstandings. Fast forward to today, $28 trillion. The Congressional Budget Office said earlier this year that between now and 2034, we'd expect that to continue to grow — could be as high as $50 trillion. So in many ways, the new SEC mandatory clearing rule is about preparing the Treasury market to grow. In short, what it does is it requires members of a covered clearing agency to introduce trades to the clearing house. That will change both the way firms access the Treasury markets — both repos and straight purchase and sales of cash Treasuries — and perhaps the cost, because there'll be a cost of clearing. But I do think it's requiring people to step back and say, how are we going to access this important market come 2026 when this is fully implemented? We've been busy both here in the US and on the road visiting with clients, guiding them through this rule. It's a large and extensive rule that came in last December, and we have two research papers that we put out that really are the beginning of the discussion with clients. The first of them was called 'Reassembly Required' — it's a bit of an analysis of what does the new Treasury market look like once it's reassembled. And then the one that just came out is 'Safe and Liquid,' and it really talks about the liquidity in the market. Those are two things that this new SEC rule is designed to improve. In some ways, the rule is going to have two main benefits. One, there'll be less clearing because there's a netting element to it, so there'll be a reduction in transactions. The second is that it'll happen in one place, so from the perspective of default management, there should be some advantages there. And then I do think there'll be balance sheet advantages to the market participants. So those are the three things it'll bring. I think the last thing is: BNY, as the primary provider of clearing and settlement services to the US Treasury market, sees ourselves in the position of being able to help clients understand the rule and how they're going to gain access to this new clearing model, and also to participate in the development of the market. Today, the majority of clearing is done together with the execution — that's called the 'done with' model. And we're working actively with market participants and the various clearing houses for the development of a 'done away' model, which would allow the separation for some trades of clearing and sponsorship. We're pretty excited about that from the point of view of the things that BNY can bring to the market and our clients to help them with the solutions. But it's certainly a busy time. It's probably one of the number one conversations we're having with clients across BNY. So yeah, a busy time.

Collateral management — firstly, we mentioned in the beginning that BNY is the primary clearing platform out there for US Treasuries. We clear in excess of $12 trillion per day. Another platform closely aligned with clearance is our collateral management platform. We have a collateral management business that services clients around the world in excess of $5 trillion. A sizable portion of that is US Treasuries, but it does also include fixed income in Europe and JGBs, as well as high-quality equities that are being financed. But to your specific question, what can CCPs benefit? We're speaking to clients about those clients potentially moving the way that they post collateral to CCPs — moving from bilateral to tri-party. Now, what will this do? It will allow those clients, those financial institutions that want to post collateral to the CCP, to do it in perhaps even a more efficient way than it is today, and will allow those clients to actually benefit from the ability to optimize across their platform — across all of the financing transactions that they have. Which we think will be additive both to the financial institutions that need to pledge collateral — it'll make it more efficient for the CCPs — and it will allow for the important tool of enhanced optimization, which is optimizing across both collateral types as well as obligations.