Macro Musings with David Beckworth Sam Schulhofer-Wohl on Reforms in the Treasury Market and Developments with Central Bank Operating Systems
Jun 23, 2025
Sam Schulhofer-Wohl, Senior Vice President at the Federal Reserve Bank of Dallas, shares insights on recent Treasury market reforms and evolving central bank systems. He highlights the resilience of the Treasury market amid disruptions, emphasizing the growing role of nonbank institutions. The discussion also delves into the importance of central clearing for market transparency and stability. Schulhofer-Wohl navigates the complexities of bank capital regulations and concludes with the central banks' pivotal role in monetary policy through reserves and government securities.
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Benefits of Central Clearing
- Central clearing reduces settlement risk by acting as a buyer to every seller and seller to every buyer in treasury transactions.
- It brings uniform risk management, simplifies trades through netting, and increases market transparency.
Risks and Challenges of Central Clearing
- Central clearing concentrates remaining market risks in CCPs, so it's crucial they are well-run and well-regulated.
- Regulators must monitor for avoidance behaviors to maintain clearing effectiveness.
Multiple CCPs: Trade-offs and Market Choice
- Multiple central counterparties (CCPs) create trade-offs between economies of scale and network benefits versus competition and innovation.
- Market participants will decide whether to use one or multiple CCPs based on their preferences.
