Never mind the dense 247 pages. Just the title of Securities and Exchange Commission’s new rule concerning trading of US Treasuries, deemed the world’s most important market, will make your eyes glaze over: “Further Definition of ‘As a Part of a Regular Business’ in the Definition of Dealer and Government Securities Dealer in Connection with Certain Liquidity Providers.” But regardless of what the SEC calls it, this is a classic example of regulatory creep.
First, a bit of history. The legislation creating the SEC as part of the New Deal gave it responsibility for protecting ordinary investors. The agency exercised this responsibility by forbidding or discouraging funds that took money from the public from charging performance fees, using leverage, taking concentrated positions, short selling, buying illiquid assets, keeping positions or strategies confidential or other techniques considered too risky.