Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity: Examining Derivatives’ Role in the Treasury Market

Digital Assets and Bank RegulationHouse Financial Services · April 29, 2026 · 119th Congress
The House Financial Services Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity held this hearing to examine how futures, options, and swaps support liquidity and price discovery in the roughly $30 trillion US Treasury market, ahead of upcoming SEC mandatory central clearing deadlines for cash Treasuries and repo. Begins at ▶ 0:00:01
Transcript
Highlights

Title

Derivatives' role in supporting US Treasury market liquidity and resilience

Purpose

The House Financial Services Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity held this hearing to examine how futures, options, and swaps support liquidity and price discovery in the roughly $30 trillion US Treasury market, ahead of upcoming SEC mandatory central clearing deadlines for cash Treasuries and repo. Witnesses discussed clearing readiness, the Basel III endgame re-proposal, cross-margining, and risks including foreign-cleared US Treasury futures and gaps in market oversight. Begins at▶ 0:00:01

Who spoke

• Chairman Frank Lucas (R-OK?)▶ 0:00:01: Opened the hearing, noting derivatives markets are key to hedging, price discovery, and liquidity▶ 0:00:38, and highlighted new SEC/CFTC exemptive relief for customer cross-margining▶ 0:02:21; later chaired Q&A, asking McPartland about derivatives' link to lower taxpayer borrowing costs▶ 1:25:35 and Duffy about the state of clearing readiness▶ 1:27:46.

• Ranking Member Vargas▶ 0:03:41: Cited past Treasury market volatility episodes (2014, 2019, 2020, April 2025) and the Fed's 2020 "dash for cash" intervention▶ 0:04:30; raised concern about reported OFR staffing cuts of over 60%▶ 0:05:51 and central bank independence▶ 0:06:15; later pressed Duffy to elaborate on Bank of England oversight risk▶ 1:31:19 and asked Yadav about the basis trade▶ 1:33:48.

• Chairman French Hill (R-AR)▶ 0:06:42: Gave a brief opening statement on derivatives' role in price discovery and the Basel III re-proposal▶ 0:07:12, and paid tribute to the late Rep. David Scott (D-GA)▶ 0:07:57.

• Kevin McPartland, Crisil Coalition Greenwich▶ 0:08:47: Testified Treasury market volume averaged over $1 trillion daily in 2025, up 60%▶ 0:09:46, with market turnover rising from 3% to 3.8% of debt outstanding▶ 0:10:17; said futures volume equaled 93% of underlying bond volume▶ 0:11:35 and March 2026 saw a record $1.4 trillion average daily trading with no plumbing stress▶ 0:14:14.

• Terrence Duffy, CME Group▶ 0:14:44: Said CME's clearing generates about $85 billion daily in efficiencies, including $27 billion in interest-rate savings▶ 0:17:10; warned that FMX's US Treasury futures cleared through a London clearinghouse expose the US to Bank of England resolution authority that could "haircut or tear up" US Treasury contracts in a crisis▶ 0:18:42▶ 0:19:39; later described how the Bank of England tore up nickel trades at the London Metal Exchange as a precedent▶ 1:32:50.

• Jeff Cranston, Optiver▶ 0:20:30: Explained how Treasury futures, options, and SOFR swaps support liquidity and price discovery▶ 0:21:30, and outlined industry work on done-away clearing access and margin efficiency ahead of the SEC mandate▶ 0:23:07; noted central clearing will improve regulators' visibility into fragmented market data▶ 1:29:39.

• Professor Yesha Yadav, Vanderbilt Law School▶ 0:25:16: Said the Treasury market grew from about $5 trillion outstanding in 2008 to over $31 trillion today▶ 0:25:46; argued oversight is "broken, inadequate, and dated," citing opaque bilateral repo, patchy secondary-market reporting outside FINRA broker-dealers, and no SEC-CFTC data sharing despite cross-margining▶ 0:27:32▶ 0:29:23; later explained the basis trade mechanics for Rep. Vargas▶ 1:34:09.

• Rep. Bill Huizenga (R-MI)▶ 1:35:45: Asked Duffy whether derivatives lower consumer borrowing costs like mortgages▶ 1:36:13, and questioned McPartland on how hedging benefits real-economy companies in his district▶ 1:38:13.

• Rep. Brad Sherman (D-CA)▶ 1:41:25: Warned the SEC could allow crypto firms to tokenize Treasuries without full securities compliance, creating uninsured "coin" products▶ 1:42:39; cited SVB's failed interest-rate swap hedge and AIG's credit default swap unit as past derivatives-related disasters▶ 1:44:29▶ 1:45:12.

• Rep. Andy Barr (R-KY)▶ 1:46:31: Asked McPartland for a "derivatives 101" explanation of central clearing benefits▶ 1:46:58 and asked Duffy how the 2023 Basel III proposal failed to recognize central clearing's risk reduction▶ 1:48:47.

• A committee member (questioning on tokenization and prediction markets)▶ 1:54:48: Asked Duffy whether split SEC/CFTC jurisdiction over tokenized equities under the Clarity Act creates ambiguity▶ 1:54:48, and about CME's prediction-market offerings▶ 1:56:36.

• A committee member (Nebraska)▶ 1:57:58: Discussed agricultural futures markets, asking Duffy and McPartland about downstream effects for ag producers▶ 1:58:25 and Duffy about fertilizer costs tied to oil price swings▶ 2:00:03; asked Cranston how Optiver manages liquidity around USDA report releases▶ 2:00:56.

• A committee member (closing questioner)▶ 2:03:21: Asked Cranston how the Basel re-proposal could further support derivatives▶ 2:03:43, Duffy why competition among Treasury clearinghouses (ICE and CME alongside FICC) matters▶ 2:04:29, and McPartland whether the SEC's clearing mandate is the right approach and what the market would look like without central clearing▶ 2:06:35▶ 2:07:53.

Key moments

• Duffy warned that FMX's US Treasury futures, cleared through a London-based clearinghouse ultimately backstopped by the Bank of England, could be haircut or torn up in a systemic crisis since UK law obligates the Bank of England to prioritize gilts and the pound over US Treasuries▶ 0:19:08▶ 0:19:39.

• Duffy cited the London Metal Exchange nickel default as precedent: the Bank of England tore up winning trades to offset losers, which he called "not risk management"▶ 1:32:50.

• McPartland reported Treasury market average daily volume hit a record $1.4 trillion in March 2026 with no signs of stress in market plumbing▶ 0:14:14.

• Duffy said CME's clearing generates roughly $85 billion in daily efficiencies, including $27 billion in interest-rate savings, aided by cross-margining with FICC▶ 0:17:10▶ 0:17:40.

• Yadav testified the US lacks real-time, consolidated oversight of Treasury-linked markets, noting bilateral repo opacity, incomplete secondary-market reporting outside FINRA broker-dealers, and no SEC-CFTC data-sharing arrangement despite the new cross-margining relief▶ 0:27:32▶ 0:29:23.

• Sherman raised the risk of SEC exemptive relief allowing crypto firms to tokenize Treasuries as unbacked "coins," drawing a parallel to SVB's failed interest-rate swap hedge and AIG's unregulated credit-default-swap subsidiary▶ 1:42:39▶ 1:44:29▶ 1:45:12.

• Duffy disputed that lower Treasury borrowing costs reduce US debt, noting the debt is around $39 trillion and headed toward $50 trillion regardless▶ 1:37:27.

• Duffy said basis-trade-related holdings grew by $317 billion since Q1 2022 to $1 trillion in notional Treasury futures value today▶ 0:16:26.

• Yadav explained the basis trade's risk: when repo financing tightens, the trade "can spiral and it's very difficult to control the risk"▶ 1:35:25.

• Duffy said he does not believe an ambiguous size-based jurisdictional carve-out in the Clarity Act for tokenized equities is appropriate, arguing "an equity is an equity" regardless of tokenization▶ 1:55:18.

Metadata

CommitteeHouse Financial Services
Chamber / CongressHouse · 119th Congress
DateApril 29, 2026
TypeHearing
Witnesses
Mr. Kevin McPartland — Head of Research, Market Structure and Technology, Crisil Coalition Greenwich
Mr. Terrence Duffy — Chairman and Chief Executive Officer, CME Group
Mr. Jeff Cranston — Head of Corporate Strategy, Optiver
Professor Yesha Yadav — Milton R. Underwood Chair, Professor of Law and Associate Dean, Vanderbilt University Law School
Videoyoutube
Transcript177 caption blocks · 12,059 words · 2:09:13 runtime
EventCongress.gov 119245