Scott Bessent, U.S. President-elect Donald Trump’s nominee for Treasury Secretary, voiced concerns on Thursday over potential foreign control of the U.S. Treasury market, a key component of the nation’s financial stability. Testifying before the Senate Finance Committee, Bessent addressed the ongoing debate regarding Wall Street billionaire Howard Lutnick’s plan to clear U.S. Treasury futures through a U.K.-based firm, potentially diminishing U.S. oversight.
Lutnick’s BGC Group, a major brokerage firm, launched the FMX Futures Exchange in 2024 and is planning to offer U.S. Treasury futures contracts in the first quarter of 2025. The exchange has partnered with the London Stock Exchange Group’s (LSEG) London Clearing House (LCH) for clearing services, raising concerns among U.S. lawmakers about the loss of control over U.S. Treasury market trades.
With the U.S. Treasury market valued at approximately $28 trillion, it stands as the largest bond market globally, playing a pivotal role in U.S. government financing and global financial stability. During the confirmation hearing, Senator John Cornyn (R-TX) inquired about the potential financial stability risks of allowing foreign entities, such as LCH, to clear U.S. Treasury futures. He specifically referenced concerns over the Bank of England potentially assuming control during a crisis, instead of U.S. authorities.
Bessent affirmed that U.S. oversight is crucial, especially in times of market stress. “It is important for the U.S., for U.S. Treasuries, for us to be able to resolve any stress issues in the market in the U.S.,” he said. Bessent further highlighted the significance of maintaining control over U.S. Treasury operations, referencing the 2008 bankruptcy of Lehman Brothers and the global fallout triggered by issues related to its U.K. subsidiary.
The Treasury Secretary nominee’s stance reflects a broader concern about the security and stability of the U.S. Treasury market, which serves as a backbone for the global financial system.
An FMX spokesperson responded to concerns, emphasizing that the exchange is fully approved by the U.S. Commodity Futures Trading Commission (CFTC) to list U.S. Treasury futures contracts. Additionally, LCH, which is registered with the CFTC, assured that all customer collateral for futures contracts is held onshore in the U.S., in compliance with CFTC regulations designed to protect U.S. assets.
Bessent, who was selected for the Treasury Secretary position despite Lutnick’s support for Trump’s administration, acknowledged the need for a closer examination of the situation and pledged to investigate further.
As the confirmation process continues, the fate of U.S. oversight over the Treasury futures market remains a critical point of contention, with significant implications for financial stability both domestically and globally.
