At a confirmation hearing on Thursday, Scott Bessent, President-elect Donald Trump’s pick for Treasury Secretary, emphasized the importance of U.S. oversight of the bond market, particularly regarding a proposal by Wall Street billionaire Howard Lutnick. Lutnick’s firm, BGC Group, which launched a futures exchange last year, plans to introduce U.S. Treasury futures in the first quarter of 2025. This exchange, known as FMX Futures Exchange, has partnered with the London Stock Exchange Group’s (LSEG) London Clearing House (LCH), raising concerns over potential loss of U.S. control over Treasury market trades.
The U.S. Treasury market, valued at around $28 trillion, is the largest bond market in the world and essential for both U.S. government financing and global financial stability.
Senator John Cornyn questioned Bessent during the hearing about the possible financial stability risks associated with clearing U.S. Treasury futures at LCH, citing the possibility that the Bank of England could oversee a default scenario, thereby diminishing U.S. control.
Bessent responded by stressing the need for the U.S. to maintain authority over the Treasury market. “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 stated. He also noted the historical impact of the 2008 bankruptcy of Lehman Brothers, which, in part, stemmed from issues with its U.K. subsidiary.
Lutnick, a key Trump supporter, was originally considered for the Treasury Secretary role but instead was appointed to lead Trump’s trade and tariff strategy as head of the Commerce Department.
Despite these concerns, FMX representatives stated that the exchange is fully approved by the Commodity Futures Trading Commission (CFTC) to list U.S. Treasury futures contracts. LCH, also registered with the CFTC to clear futures contracts, assured that all futures customer collateral would be held in the U.S. onshore to protect U.S. firms’ assets.
Bessent indicated that he plans to thoroughly investigate the issue, ensuring U.S. control and oversight remain intact in this critical market.
