SEC, Treasury warn against zero haircuts for Treasury repos

Gensler and Liang say more conservative treatment of hedge fund trades is desirable

Gensler SEC dollar montage

Dealers are not collecting enough margin on repo trades with hedge funds, according to US Securities and Exchange Commission (SEC) chair, Gary Gensler.

“Many hedge funds are receiving the vast majority of their repo financing in the non-centrally cleared bilateral market, where haircuts or initial margin requirements are not necessarily applied,” Gensler said at the Federal Reserve Bank of New York’s annual US Treasury Market Conference on November 16.

As a result, dealers “are ending up with

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