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Speaker 1: The SEC voted on a new mandate for hedge funds

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Speaker 1: that SEC chair Gary Gensler says will help lower risk

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Speaker 1: throughout the financial system. He spoke to Bloomberg's Kaylee Lines

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Speaker 1: about the new rule and more just moments after the vote.

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Speaker 2: Does this new rule go far enough to address those

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Speaker 2: concerns or will the SEC? Should the SEC, or will

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Speaker 2: the SEC do more.

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Speaker 3: To address that? Well, what we did today is one

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Speaker 3: part of a set of reforms that we're looking at,

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Speaker 3: but an important part of it because it has to

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Speaker 3: do with lowering risk in the system in the US

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Speaker 3: treasury markets, And to your question, there is a lot

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Speaker 3: of borrowing leverage in the treasury markets. Bringing things into

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Speaker 3: central clearing can address that in a number of ways.

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Speaker 3: One is the clearing itself does something called multi party netting,

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Speaker 3: which lowers a lot of risk in the system. But secondly,

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Speaker 3: clearinghouses collect more. They collect collateral against transactions, and right

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Speaker 3: now a lot of the markets is operating and is

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Speaker 3: not collecting collateral or margin.

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Speaker 2: So like the ICBC hack we saw just recently, which

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Speaker 2: was disruptive to the treasury markets in some ways, would

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Speaker 2: what just past today help avoid that in the future.

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Speaker 2: Is a step toward avoiding that, or do you still

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Speaker 2: see situations like that could arise.

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Speaker 3: I think there's some relation, but that's a separate risk, and.

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Speaker 1: We have to be very aware.

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Speaker 3: There are risks in our systems from cyber attacks, and

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Speaker 3: that circumstance is publicly revealed. It was a ransomware attack,

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Speaker 3: and that ransomware attack disrupted a treasury clearing broker dealer,

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Speaker 3: and so the clearing house operated smoothly through that. But

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Speaker 3: for that one clearing broker and its customers, they had

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Speaker 3: to quickly find workarounds.

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Speaker 2: Commission you Ada during the meeting today, to paraphrase his words,

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Speaker 2: essentially suggested, we, Camperton, this rule is going to solve

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Speaker 2: all the systemic risks present in this market. He mentioned

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Speaker 2: specifically higher interest rates, especially as the Federal Reserve is

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Speaker 2: about to make get another rate decision today. How concerned

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Speaker 2: are you about higher for longer rates and the potential

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Speaker 2: vulnerabilities it causes in treasuries?

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Speaker 3: Well, you'll be glad to hear that. I'm going to

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Speaker 3: leave interest rate policy to share Pal and his fellow

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Speaker 3: members of the Federal Reserve. But in terms of the

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Speaker 3: US treasury market, we have seen greater volatility. In fact,

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Speaker 3: we've seen volatility in the markets this year which are

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Speaker 3: historic earlier around the regional banking turmoil at the beginning

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Speaker 3: of the year, more recently even in the longer end

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Speaker 3: of the curve. And so it's really important to look

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Speaker 3: at the leverage in this system. And there's a lot

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Speaker 3: in the relationship between on the one hand, banks and

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Speaker 3: broker dealers and on the other hand hedge funds, and

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Speaker 3: that borrowing in the marketplace is part of what this

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Speaker 3: rule today will address, at least bringing the benefits of

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Speaker 3: central clearing that helps lower risk.

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Speaker 1: Well.

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Speaker 2: On the subject of hedge funds, separate news came yesterday

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Speaker 2: when a group of trade groups for hedge funds, including

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Speaker 2: the Managed Funds Association, filed suit regarding to rules the

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Speaker 2: SEC already passed earlier this fall related to short selling

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Speaker 2: and related securities lending. I know you can't comment on

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Speaker 2: a specific lawsuit, but when you think about them collectively,

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Speaker 2: the idea that Wall Street seems to be just taking

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Speaker 2: every rule you pass and taking it specifically to the

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Speaker 2: Fifth Circuit Court of Appeals, How does that make you feel?

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Speaker 2: How does that maybe change how you're thinking?

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Speaker 3: It's part of democracy and they have their rights to

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Speaker 3: do that. I feel very confident in the work that

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Speaker 3: the team is put together. The commission reviewed it, went

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Speaker 3: out to throw public comment, and I would note that

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Speaker 3: these are two rules to promote greater transparency in our market,

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Speaker 3: as mandated by Congress after the financial crisis of two

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Speaker 3: thousand and eight. Congress mandated that we adopt roles around

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Speaker 3: what's called securities lending and separately around short selling in

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Speaker 3: the markets. And that's what we did, based upon public feedback,

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Speaker 3: and very confident in a team's work.

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Speaker 2: But more broadly, beyond just those two rules, when you

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Speaker 2: look at the real like litany of course cases the

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Speaker 2: SEC is now grappling with, are you worried that Wall

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Speaker 2: Street is going to continue using the course to dismantle

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Speaker 2: the work of this regulatory body.

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Speaker 3: Again, this is not a new feature of our democracy,

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Speaker 3: and think frequently it's happened in the past as well.

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Speaker 3: So we put together all that we do according to

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Speaker 3: the legal authorities Congress has given us, and how courts

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Speaker 3: interpret those authorities. We do it based on public comment,

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Speaker 3: and we do it based upon economic analysis. And again

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Speaker 3: I feel very proud of this agency and the hard

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Speaker 3: working staff and my fellow.

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Speaker 2: Commissioners on the subject of Congress. Obviously, we're about to

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Speaker 2: head into an election year. There is a chance that

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Speaker 2: come twenty twenty five, Republicans can control both chambers of Congress,

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Speaker 2: potentially the White House as well. Does that set a

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Speaker 2: kind of deadline on the work you were doing here,

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Speaker 2: knowing that theoretically, within a certain number of legislative days,

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Speaker 2: Congress could have the power to overturn some of your rulemakings.

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Speaker 2: How are you thinking about timeline?

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Speaker 3: I think of it this way. We have a privilege

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Speaker 3: of service. Somebody like myself have privilege to service, and

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Speaker 3: it's about doing the maximum good for the maximum number

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Speaker 3: of people. Our clients, so to speak, are three hundred

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Speaker 3: and thirty million Americans in the time that we have

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Speaker 3: in these jobs. That's what I'm focused on.

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Speaker 2: And obviously the Commission and the staff of the Commission

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Speaker 2: is still hard at work on a number of issues,

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Speaker 2: one of them dealing dealing with a number of filings

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Speaker 2: of spot bitcoin ETFs. You know, mister Chaa, I have

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Speaker 2: to ask you this question. There has been a lot.

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Speaker 3: Very significant about the twenty six trillion dollar treasury market,

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Speaker 3: which is really the base of our entire capital markets.

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Speaker 3: It's how we fund our government, it's how our Federal

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Speaker 3: Reserve does monetary policy, it's how we maintain the dollar

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Speaker 3: dominance around the globe. And you want to ask me

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Speaker 3: about crypto in.

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Speaker 2: My defense, Commissioner you Ada also brought up crypto in

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Speaker 2: this open media priorities.

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Speaker 3: I mean, the US Treasury market is a very consequential,

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Speaker 3: very important market. Crypto secure are not only much smaller.

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Speaker 3: It's not how we fund our government, it's not how

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Speaker 3: we conduct monetary policy. And for many investors, they've been

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Speaker 3: harmed in that market, and they're being harmed because there's

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Speaker 3: too much non compliance. And it's not just non compliance

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Speaker 3: with securities laws, it's non compliance with the rift of

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Speaker 3: other laws, our sister regulator in the market space, the

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Speaker 3: Quality of Futures Training Commission, the US Department of Treasury,

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Speaker 3: and Financial Crimes Enforcement. But again I do ask, and

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Speaker 3: if you look at the focus and the priorities, the

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Speaker 3: US Treasury market and what we did today is really

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Speaker 3: quite important to our capital.

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Speaker 2: Markets, absolutely, and that's why we have discussed it. But

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Speaker 2: you are actively engaging with number of matters related to

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Speaker 2: crypto specifically, So I think, so this is this is

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Speaker 2: fair game, especially when you are having staff with meeting

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Speaker 2: with a number of issuers in recent days.

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Speaker 3: I'm glad that you at least now agree that the

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Speaker 3: priorities were more to the treasury market. So what is

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Speaker 3: your question about bitcoin?

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Speaker 2: We have seen in recent days SEC staff engaging with

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Speaker 2: issuers of a number of which have filed for spot ETF.

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Speaker 2: We've seen a number of amendments to those filings. It

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Speaker 2: seems that market participants in crypto have a sense that

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Speaker 2: we are reaching the end stages here. Typically is this

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Speaker 2: kind of engagement with the SEC. Not prejudging anyone filing,

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Speaker 2: but the level of engagement we are seeing signifying of

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Speaker 2: things getting easier, closer to resolving, or things getting more difficult.

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Speaker 3: Again. We have I think somewhere between eight and a

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Speaker 3: dozen filings in front of this agency with regard to

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Speaker 3: exchange traded products around bitcoin, and the staff of the

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Speaker 3: various divisions respond when market participants have filings. We also

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Speaker 3: had a court case earlier this fall in this regard,

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Speaker 3: and so we do things according to our authorities and

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Speaker 3: how courts interpret our authorities, and that's what we'll do

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Speaker 3: here as well.

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Speaker 2: I think you're referring there to the Gray Scale case.

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Speaker 2: Just one final question related to courts. As we talked

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Speaker 2: about a number of litigation the SEC is already dealing with.

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Speaker 2: There has been a lot of talk about one of

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Speaker 2: your other proposed rules changes related to climate disclosures and

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Speaker 2: Scope three being included, potentially unleashing another huge wave of litigation.

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Speaker 2: How is that informing the SEC's thinking as it considers

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Speaker 2: that final rule and what it looks like.

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Speaker 3: Well, we have right now in our capital markets, not

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Speaker 3: just hundreds, but probably over one thousand companies today that

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Speaker 3: are already making climate risk disclosures to investors. We have

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Speaker 3: investors representing tens of trillions of dollars of assets under

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Speaker 3: management making investment decisions based on those disclosures. So we

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Speaker 3: did We put out a proposal about twenty months ago

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Speaker 3: with regard to climate risk disclosures. We got lots of comments,

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Speaker 3: sixteen thousand comments, So we're still sorting through that. But again,

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Speaker 3: just as I said earlier, we will if we go

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Speaker 3: forward because I can't prejudge anything. We will do it

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Speaker 3: based on the law and how courts interpret our authorities.

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Speaker 1: SEC Chair Gary Gensler speaking with Bloomberg's Kaylee Lines for

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Speaker 1: more conversations just like this one. Subscribe to the Bloomberg

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Speaker 1: Talks podcast. I'm Charlie Pellett, and this is Bloomberg