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SIFMA’s 2025 Priorities

Recently, SIFMA has met with our Board to set our 2025 priorities on behalf of our members and in support of our mission to promote effective and resilient capital markets. In this episode of The SIFMA Podcast, SIFMA’s president and CEO, Ken Bentsen, and SIFMA’s COO, Joseph Seidel, sit down to discuss SIFMA’s priorities for the year ahead.

Transcript

Edited for clarity

Ken Bentsen: Thank you for joining us for this episode in SIFMA’s podcast series. I’m Ken Benson, SIFMA’s president and CEO. I’m joined today by my colleague Joe Seidel, SIFMA’s chief operating officer. We are here today to talk about SIFMA’s priorities as we head into 2025. As we jump into the conversation, I want to call out for our listeners that SIFMA’s 2025 capital markets outlook is on our homepage at sifma.org. I commend it to all of you as a reference tool containing comprehensive data on the capital markets investor participation, savings and investment, and the securities industry.

So with that, let’s begin. Joe, SIPMA is an advocacy organization. We advocate on legislation, regulation, and business policy for effective and resilient capital markets. And as we do every year, we recently met with our board to set our 2025 priorities on behalf of our members and in support of our mission. Before we do get into the priorities though, maybe let’s talk a little bit about the intersection of our work and its impact on the capital markets at a higher level.

Joe Seidel: Absolutely, Ken. It goes without saying that the capital markets are the engine of economic growth here in the U.S. They connect investors with companies and governments seeking funds for growth and for development. Through the financial markets, businesses raise money for expansion and municipalities can fund important public projects investors save for life milestones, and foundations are able to donate to their causes.

From SIFMA’s perspective, we advocate for effective and resilient capital markets. We do this by engaging lawmakers and regulators with our subject matter experts on legislative regulatory and business priorities. We also provide information, analysis, and expertise for informed regulatory compliance, facilitate fair, orderly markets, and efficient market operations through our role as a coordinating body, and serve as a spokesman for the industry utilizing our substantive research. Thousands gather through our committees, forums, and roundtables and participate in our leading executive education and events. To give concrete examples of what this looks like in our day-to-day work, in 2024, SIFMA submitted more than 140 regulatory comment letters, studies, and legislative testimony and produced or commissioned over 40 research reports.

We successfully led the effort to shorten the settlement cycle to T+1 and coordinated industry-wide exercises to protect against market disruptions in the ever-present threat of cyber attacks. We also coordinate incident response on behalf of the industry when such events occur and we particularly have led over the last several years, a very dedicated campaign to a large amount of rulemaking that the most recent commission has put forth that has caused all types of reaction from our membership and have had a very successful run at either opposing but more likely amending and improving those items as they’ve come to pass. We continue to advocate on consequential issues for the markets and our members now with multiple and far-reaching regulatory agendas coming from the new administration encompassing topics from the proposed Basel III endgame reforms to the implementation of the Treasury clearing mandate. Ken, let’s get more specific in terms of our 2025 agenda and it’s a big one.

Ken Bentsen: Treasury clearing, I think, is a great place to start. the whole Treasury clearing effort in many ways underscores the role that SIFMA plays. you start with, obviously, we bring together the primary dealers and other dealer side market participants, the buy side of the market. There’s obviously a huge component of the Treasury markets. And we’re talking about the most important market and security in the world, right? Treasuries are the benchmark for so many different things. It’s how the U.S. government funds itself. It’s the backbone of really in many respects you think about as the backbone as the dollar, as the reserve currency. It’s a safe haven for investors from all over the world.

And so you think about SIFMA’s engagement with this, obviously, you had the various regulatory community through the Interagency Working Group along with the Treasury Department itself, the issuer of the debt, who over the years has looked at different changes they want to make with respect to increasing resiliency in that ever so important marketplace. And this culminated with the Securities and Exchange Commission promulgating a rule to mandate central clearing of cash treasuries and repo, which was already occurring in the marketplace, but really to push this through in a very aggressive timeline. I’ll get into that in a second.

SIFMA’s role, again, was many parts. We convened the industry. We gave our views during the promulgation, during the notice and comment of the rule. That was very impactful. A lot of engagement with not just the SEC, but Treasury and others in the process. So fast forward, we get to a final rule for Treasury and now the industry has to move to implement. And as we like to say, our regulators will propose rules, they’ll finalize rules, but at the end of the day, often it’s the industry that’s left to implement these rules, build the systems, develop the protocols, policies, and procedures. Joe mentioned the T+1, you know, we did that, that was a three-plus-year effort. And that’s true here with treasury clearing. you know, SIFMA has really taken the lead with our members, buy side, sell side, and beginning the implementation, starting with the development of standardized documentation. But there are many, many other market participants who are coming into it. Obviously, the utilities of DTCC and the FIC. You’ve got particularly for done away clearing that will be developed, you’ve got other participants who are coming in who want to develop that product. So it’s a multifaceted effort.

The first thing is with the compliance dates. And as I mentioned, they’re quite aggressive under the existing rule, beginning with March 31 of this year, 2025, where covered clearing agencies must implement their enhanced practices and clear risk management margin, customer asset protection. And then at the end of this year, December 31, direct participants of the CCAs must clear eligible cash secondary market transactions. And then six months later, June 30 of 2026, direct participants of CCAs must begin to clear eligible repo. There’s a lot of work that has to be done on this. And we know this just from the last pretty much year we’ve spent working just on standardized documentation for “Done-With” transactions. And then as I mentioned, “Done-Away”, that’s still the marketplace for that still being developed.

So, you know, we, and I would say we’ve underscored all this work through a document that SIFMA prepared along with EY that was published in this past November, which includes an overview of the mandate, all the steps the industry has to meet for the timeline to implementation, and all of the numerous interpretive questions that need to be accomplished, as well as, I might add, a number of issues that the regulators themselves, particularly the SEC, but also potential regulators need to address. really gating issues in moving forward with the clearing mandate. And I commend that EY report to people who haven’t looked at it. then I also would add the Treasury markets are a global, they’re a global security global asset there are global counter parties and getting people to understand this in the U.S. is one thing, but then around the world getting market participants to understand this is coming and you need to be prepared for it. To that end, and I think we’ll get into that, there’s a lot of work to be done here, but this is going to be among all the priorities we have for 2025, I mean, this is a major, major priority for us.

Joe Seidel: So with that in mind, we’ve also asked the SEC to extend the implementation timeline by at least one year for the cash and repo clearing deadlines, as well as for the rules to be delayed in terms of margin and other facilities at the CCP. Can you walk us through the reasons for this?

Ken Bentsen: Yeah, as I hope I laid out for our listeners, mean, this is a big undertaking and we put a lot of time and effort into this so far and the industry has and it’s going to continue. But there’s a great deal of concern and this has been evident since we started this work from a broad array of market participants that these timelines are going to be very difficult to meet and a concern that we would unnecessarily create at best friction and at worst disruption in the most important marketplace in the world. And that would be counterintuitive to what this rule is trying to accomplish. And so as we’ve gone through and done our work, prepared the report with EY, talked to market participants across the U.S. and globally, members have really come to believe that it is going to be impossible to meet the deadlines that were set that I went through just a minute ago.

That’s not to say that anyone is against moving forward. This is happening. As I said, the marketplace is already moving towards central clearing. And no one’s talking about not moving forward with this. But what we don’t want to do is create unnecessary disruptions to the marketplace. We did just last week ask the SEC for an extension of the implementation dates of at least a year. think some market participants feel that it should be longer, some maybe not as long, but I think a very strong consensus across the marketplace of at least a year to allow this work to get done. And as I mentioned, this is not just the industry getting its work done, which the industry is working mightily with a tremendous commitment of labor and capital to it. But there’s work that the SEC and the bank regulators, accounting sector needs to do to make this work. And we’ve been engaged with all of the regulators on this. They’re well aware of it, and I think they’re working on it. But, you know, there’s no reason to force something just to meet an arbitrary deadline and create unnecessary disruption. And so, you we’re going to continue to talk with our regulators, with the SEC, with the Treasury Department, and others to say, let’s be very methodical and deliberate about how we do this, and let’s not create unnecessary disruptions. So there’ll be more to come on that and we’ll be coming back to our listeners on that.

Joe Seidel: And my impression is that at the agencies, we’ve gotten fairly good reception so far to those ideas.

Ken Bentsen: Yeah, I think that’s right. I think, you know, I mean, they’re asking all the right questions. They want to, you know, they, you know, we’ve laid out and we’re very, we were very deliberate in our own process of we thought we might get to this point of needing an extension, but we didn’t, you know, but we wanted to show that we’re doing the work and that we’ve identified the issues and that, you know, this isn’t like your senior year in college when you don’t start to write the final paper until the, you know, the night before. This is something where the industry started working even before the rule was final. We have a very thick file of all the matters that need to be addressed and why it makes sense to be deliberate in the process. And to your point, Joe, you’re right. I think that’s been recognized by the official sector. We’ll keep talking to them about it.

Maybe switching topics, know, Joe, you mentioned earlier, you know, of the priorities, you know, the Basel III  Endgame, which at least in its most recent iteration in the U.S. has been paused. And I might add, you know, that the United Kingdom has paused theirs in response to the U.S. pausing the proposed rule. I think the European Union, they have a little bit different legislative process is at least pausing theirs for a year. Maybe let’s switch to prudential regulation Basel III, and other proposed liquidity rules. Where does all that stand now?

Joe Seidel: Well, I think we’re in an exciting time in the prudential world in terms of the changing landscape and some of the potentially new people will be seen in the various positions at the prudential regulators. First and foremost and high on our list are the Basel III endgame standards and very related to that, the questions around stress testing at the Federal Reserve and how the two interact with each other as well as interact with other capital standards. As we approach, I think we’re in now year 15 or 16 of Basel consideration of the FRTB. I think there’s a lot of questions in terms of whether it’s really fit for purpose given all the prudential measures that have been enacted and implemented over the last 15 or 16 years.

Going back or by sake of a little background, in the U.S. we have a so-called Basel Endgame which is designed to finalize significant parts of the credit risk, operational risk, and most particularly the fundamental review of the trading book which applies Basel standards, new tougher Basel standards to the market risk activities, the so-called trading book. And again, SIFMA has been engaging on that from the beginning and there have been a series of problems with it throughout. And so in the U.S. implementation, they essentially offered proposed what we would kind of call pure Basel beginning in 2023. SIFMA created multiple working groups on that. We filed five comment letters, some with other groups, some without other groups. We did an extensive quantitative impact study with ISDA and we’ve published, I think, 10 plus blogs, which I highly recommend to anybody who’s interested in the Basel III, both history and some of the key issues where we think it very inordinately and inappropriately sort of penalizes capital markets instruments. And throughout this, and we’ve had significant engagement with a lot of good take up from the regulators on our key issues. So we filed comments in the beginning of 2024. We had extensive discussions with the agency through much of the year. At some point in the year, as an attempt to move the thing along, think, and recognizing while we filed five of comment letters, there were 300 other comment letters also filed all in 95 or 90% of them in opposition. So some were filed by other financial groups, others significant amount was filed by what we would call the end-user community. And all of this led to a substantial rethinking of parts of it at the Fed. And that was unveiled later in the year by the Fed as a of a quote-unquote compromise they were encouraging but fortunately or unfortunately, the compromise kind of fell flat to some extent from the industry side, but also from the government side.

So where we ended up last year was essentially a proposal stalled in place with the new election. And then late in the year, I believe the day before Christmas, bank trade associations filed a lawsuit challenging the stress testing process in particular on administrative procedure grounds. So SIFMA certainly has a big interest in that and really highlighting many of the issues that SIFMA for years have been filing in comment letters we’ve done studies on, particularly related to the global market shock portion of the stress testing process. And so we’re encouraged by the lawsuit, we’re encouraged by the engagement. As a result of that, the Fed has indicated publicly said that they’re going to be modifying the stress testing process and they’re going to be creating a proposals open for public comment where a SIFMA will undoubtedly be filing and giving our reinforcing our views on both transparency, plausibility, and other areas of importance both on the global market shock which at this point is we would sort of suggest may even be unnecessary. As well as the rest of the stress testing regime.

So that has been kind of the featured event of recent recently in the prudential world. That lawsuit and the Fed response to it has caused many to view and encourage a pause of the Basel process because the capital required by the stress testing regime is so intertwined with what this capital that’s required by the Basel baseline and the core capital baselines. It’s our view and the industry view that they align and that as the Fed changes its stress testing regime, it’s very hard to comment on the Basel regime without taking that into account. So we are very committed. We’re very committed. We’ll be likely filing amicus on the lawsuit, bolstering the points made by the bank trade associations with further factual sort of support from our experiences and then we will also be aggressively commenting on the stress testing process all with the idea that once we kind of know where that is where the lay of the land is, we can comment more intelligently on the market risk issues in Basel itself.

So on the final Basel proposal the operational risk that portion the Credit risk portion I think are areas where a lot of progress has been made. Unfortunately, the market risk area is one where virtually very minimal progress has been made. So many of the issues we had with the original proposal, we believe are still in the current proposal. We have made some modest progress in certain areas, which we totally appreciate and recognize from the regulators. But I think a lot more work will be done when we get to that point that we’re ready and the agencies are ready to start to think about re-proposing it. But I think the stress testing convention will be first and then we will move to there. And with the idea, quite frankly, that ultimately the members of SIFMA have all raised capital or some of the most well-capitalized firms in the world and that there should be a very high bar and that there should almost be no circumstance where yes, capital can be more efficiently allocated between products and types, but there should be no capital increases for anybody due to this. It should be a better, more accurate, more long-lasting way to measure capital, a more efficient way to measure capital, but it should not in any way, shape or form increase the overall level of capital that our firms currently have or have had for the last many years.

So beyond that, think capital is kind of the featured event. There will be liquidity rules ultimately after that, but I’m not even sure at this point. It’ll be hard to see any of the capital or liquidity pieces really getting much progress made in 2025. I think we’ll see as people get in place and what timeline they develop. But I would say we’re probably looking to do a lot of work on it in 2025. Talk about details in the stress testing process and how they relate. Relook at our various sort of input on Basel and see how that relates to them. Maybe get a new proposal, maybe not in 2025. And then probably more of the final actions on these things. And then the natural moving on to liquidity and other issues, maybe more of a 2026 issue.

Ken Bentsen: That’s interesting. A couple of points to what said. I think this is right that even through this process, thinking about the level of capital that the large dealer banks, the GSIBS have in the U.S., as well as other banks, compared to the great financial crisis, it’s multi-fold. I think the policymakers even said during this previous process that the U.S. banks are sufficiently capitalized. It was just a policy question among some as to whether or not they should have more. But, you know, and then not understanding the knock-on effect, which I think is a distinction to the U.S. particularly, that the role that large dealer banks play in the capital markets and then of course the role the capital markets plays in the broader U.S. economy as compared to Europe and even the UK and other jurisdictions. And then you point out the interaction with the CCAR and the global market shock that is also unique to the U.S. important fact of the pause and to really step back and take a look at that and what the knock on effect will be. So we talked about treasury, we talked about capital, two major issues of focus for us. When you think about 2025, what else do you think goes on the horizon in terms of major policy issues for us?

Joe Seidel: Well, I think certainly tax is on everybody’s mind. And I think we’ve done a lot of work over the last beginning last spring, both on building the relationships and rebuilding in some cases because of the turnover, SIFMA’s relationships in the tax community, as well as identifying what are likely to be both likely identifying what will likely be issues that our members may face. So I think that has taken up a big chunk of SIFMA priorities. I think we’ll be also contributing pretty heavily to a hopefully SEC activities related to the equity markets and reviewing equity market structure. I think incoming chairman Paul Atkins has been quite involved in those topics and we expect there to be a pretty active engagement in that area.

We’ll also be looking at some of the existing rules that have occurred during the last several years and see if there may be timing issues with them. Certainly, in the capital markets area, we’ve been looking at short sales and securities lending in that regard, but I think there may be others as well as some review of the one-minute trade reporting that was implemented and that is on the books now from FINRA.

So those are probably some highlights. We’ll also be very active again sort of finishing off hopefully what started 10 years ago with the engagement on the DOL fiduciary rule. That SIFMA has been a leader on within the industry, within the retirement industry, but within the industry in general. And hopefully we can get a final ultimate resolution of that. So those would probably be some big things that come to mind finishing off and some of the traditional ones, cybersecurity, e-delivery will also, I think, be very important. I hopefully will, particularly on e-delivery, I think this may be a year of opportunity.

And then probably finally in the technology area, we’ve done a lot of work on creating and looking at the feasibility of a regulated settlement network, an RSN. This is building on work that the industry did on the retail side related to deposit liabilities. And I think we’ve had a successful feasibility study. I think now the next stage is to look at what needs to be done to operationalize it. What industry utilities, conventions, and protocols need to be created to really bring that to a reality, which would then be once I think that piece is done, then I think we’ll go to full sort of active engagement.

So let’s maybe talk then about how the changing policy agenda, which is shifting along with the regulatory landscape. We get a lot of questions about how will that impact us? And of course, the core of our organization continues the work we’ve always done, but the environment is now different. Ken, what do you think that will all mean?

Ken Bentsen: Yeah, it’s a good question. think, you know, we start with the SEC. You know, the prior SEC was quite prolific in its rulemaking agenda, perhaps the most prolific in history, and in particular, proposing rules that didn’t have a clear, when responding to a clear market failure and probably were things that would have been better done through, roundtable discussion or concept release. But if you think about it, there are about 20 pending SEC rules, many of which we think were not necessary and we hope will go away because again, there was no market failure and in some cases we thought would be disruptive.

There are issues, as you mentioned, that we would like to see SEC go back and look at on some rules that could be modified to be more effective, and more efficient. And I think we have an SEC that will be open to that. You mentioned the work SIFMA has been leading around the regulated settlement network on tokenized securities. I think even both in terms of traditional assets and then native digital assets, I think we’ll see an SEC in particular, and a CFTC and Congress that are very interested in writing the rules for native digital assets, things like stablecoins, cryptocurrencies and that’s important. Congress, the agencies all have a role to play here because that’s a new area where the rules are not entirely clear. And that’s important to investors for investor protection, and that’s important to our members who may want to engage in those markets on behalf of their clients. I would add the prudential regulators as well. That’s important to our members who may want to engage in those markets on behalf of their clients, but the rules are not clear and that creates a lot of not just investor protection risk, but compliance liability to our members. And so I think we will see a lot of focus on that across both the regulators and the Congress. And then of course you mentioned tax legislation will be focused on that. so I think it is a different approach.

I think the other approach is the incoming administration, they’re here, so I guess they’re not incoming at this point, is very pro-growth oriented. And that’s a positive for the markets. And I think we’ll look at the data and see what happens. But as opposed to questioning the role of markets, I think we’ll see it, looking at where we’ll see more capital formation activity, particularly in the IPO market, and where there can be efficiency. Perhaps a shift of emphasis, but we would expect still a lot of work. We’ve covered a lot of ground today. Joe, any closing thoughts you might have?

Joe Seidel: Yeah, just in closing, I think it’s going to be a really exciting 2025. I think when you have change, I think it always provides opportunity. And I think we have a lot of extremely both interesting and issues that I think are very positive for the industry. While the issues change, think at SIFMA, we will continue sort of what I would call our pillars of engagement advocacy and engagement on the regulatory side, on the legislative side, on the communication side, as well as the legal side if necessary. And we will hopefully prosecute the issues in a very positive way. And I look forward again to a very exciting year with opportunities and a lot of positive impact here coming from SIFMA and much more maybe kind of a fun offensive year as opposed to the defense we’ve been playing, or that we’ve been playing probably for the last many years.

Ken Bentsen: So with that, Joe, thank you for joining me for this discussion, and thank you to all our listeners for joining us today. To learn more about SIFMA, our priorities, and our work to promote effective and resilient capital markets, please visit us at www.sifma.org, and thank you for being with us.

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Kenneth E. Bentsen, Jr. is President and CEO of SIFMA. From 1995 to 2003, he served as a Member of the United States House of Representatives from Texas. Prior to his service in Congress, Mr. Bentsen was an investment banker specializing in municipal and housing finance. 

Joseph Seidel is Chief Operating Officer of SIFMA. 

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