Scila AB, the Stockholm-based leading independent provider of trade surveillance, risk management and anti-money laundering (AML) technology has announced that Erste Group, a major European financial institution, has successfully implemented Scila Surveillance. Scila Surveillance is a powerful and versatile trade surveillance cloud-based solution designed for comprehensive monitoring of global trading activities across multiple asset classes across the globe. Scila Surveillance targets at bringing significant advantage in upholding market integrity, mitigating financial crime risks, and ensuring regulatory compliance to its clients. “Scila is delighted to partner with Erste Group. Scila Surveillance, designed for the dynamic nature of modern capital markets, will equip Erste Group with advanced tools to effectively safeguard market integrity and investor protection.", says Mikko Andersson, Chief Executive Officer at Scila AB. “We are very positive to partner with Scila because its Trade Surveillance Solution combines a wide range of functionalities, which fits to our approach to manage Compliance risk very prudently by leveraging on modern technology.“, says Iris Bujatti, Chief Compliance Officer of Erste Group Bank AG.

The Disciplinary Committee of Nasdaq Stockholm (the “Exchange”) has found that Physitrack PLC (the “Company”) has breached the rules of Nasdaq First North Growth Market (the “Rulebook”) and therefore ordered the Company to pay a fine of two annual fees, corresponding to an amount of SEK 322,359. The Disciplinary Committee notes that it is undisputed that the Company has violated article 17 of the EU Market Abuse Regulation and the Rulebook. The violation consisted of the Company making its Annual Financial Statement Release for 2023 available on its website before it was disclosed via a press release. The Disciplinary Committee finds that the violation is serious, and therefore a fine shall be imposed as a sanction. The Disciplinary Committee considers that the Company swiftly took action to correct the situation. The Disciplinary Committee sets the fine at two times the annual fee. The Disciplinary Committee’s decision is available at: https://www.nasdaq.com/market-regulation/nordic/stockholm/disciplinary/decisions-sanctions

Today, ACER releases its Opinion on the National Resource Adequacy Assessment of Estonia. This is the first ACER Opinion on a National Resource Adequacy Assessment (NRAA). What is a resource adequacy assessment? The European Resource Adequacy Assessment (ERAA) identifies potential concerns about electricity resource adequacy across the EU and provides an objective framework for assessing the need for additional national measures to ensure security of electricity supply. Member States can complement the European analysis with their own national assessment (NRAA). While national assessments follow the ERAA’s methodology, they may introduce changes in terms of, for example: new information as it becomes available since the latest ERAA; national specificities that are not reflected in ERAA. Why an ACER Opinion? When a national assessment identifies new adequacy concerns, and the Member State informs ACER, ACER must issue an Opinion on the differences between the national and European assessments. What are ACER’s main findings? The Estonian NRAA includes elements that represent a positive benchmark for future national assessments by: Modelling the relevant neighbouring countries. Using ERAA 2023 as a starting point to ensure consistency and comparability between the two assessments. The differences with some of the ERAA 2023 assumptions are justified, as the Estonian NRAA: Incorporates new information about interconnector commissioning and renewable energy development. Better reflects regional specificities. Includes a sensitivity analysis to illustrate the role of oil shale-based generation at national level. However, the application of the updated assumptions is inconsistent throughout the assessment, as their impact on the market has not been evaluated. What are the next steps? ACER recommends the Estonian Transmission System Operator to assess how the new assumptions may impact the market and amend the NRAA as necessary. Read more.

1. Good afternoon, ladies and gentlemen. The Monetary Authority of Singapore is delighted to co-host today’s event with the World Bank. 2. If there was a Dummy’s Guide to Decarbonisation, it would probably say something like this: clean the grid, electrify everything and leave a small carbon budget for genuinely hard-to-abate sectors. 3. The focus on coal transition addresses the first of those three limbs: clean the grid. Today, our grids are primarily powered by fossil fuels, accounting for over 60% of the share of global electricity generation. Coal continues to remain the largest source of electricity globally and remains the dominant energy source for many countries.[1] 4. There is some reason for optimism. Based on IEA forecasts, more than a third of the world’s electricity will come from renewables by next year, surpassing coal as the largest source of supply. In advanced economies last year, renewables accounted for 34% of total power generation, while coal’s share plummeted to a historic low of 17%.[2] 5. However, the transition is taking place unevenly and we are seeing a different trajectory in developing regions. For instance, in Southeast Asia, coal continues to account for over 40% of the energy mix.[3] Renewables make up only a quarter of the region’s power generation.[4] We have a fair bit of ground to close, given the International Renewable Energy Agency’s (IRENA) estimates that renewables will need to account for between 90-100% of electricity generation in 2050, if are to keep to a 1.5 degree scenario for Southeast Asia.[5] 6. We should all be concerned about this because one in every seven tonnes of greenhouse gas emitted into the atmosphere comes from a coal plant in Asia. If we are serious about the climate transition, we need to get serious about Asian coal. 7. If nothing is done, coal power will continue to be dominant for three main reasons: a. Coal is already locked in. Asia’s coal plants are young, less than 15 years old on average. There is established infrastructure, and long-term power purchase agreements (PPA). These make transitioning from coal a costly process. b. The second reason underpinning the dominance is that bottlenecks in grid infrastructure are hindering renewable energy deployment. There is no transition without transmission. There is little value in adding more generation capacity if the electricity cannot reach the intended end-user. In Vietnam for example, the influx of solar and wind capacity in the South has caused renewable energy generation curtailment. At the same time, the country’s coal-dependent northern provinces face supply challenges. c. Lastly, if we only think of coal in economic terms, we have missed the plot. Coal is not just an economic asset; it is an asset with deep security and social implications. Coal is viewed as essential for energy security given its reliability as baseload capacity. In Asia, some 6.7 million jobs are tied to the coal industry, from mining to power generation. The transition away from coal, if not managed carefully, could lead to significant social disruption, particularly in regions where alternative employment opportunities are scarce. 8. These three challenges – (i) lock in, (ii) grid infrastructure, and (iii) the broader entrenchment of coal, particularly in emerging markets – highlight why broad-brush efforts to phasing out coal have met with limited success. Because coal has deep economic, social and existential roots, we need to complement these efforts with market-based solutions. 9. Market-based approaches are not just purely theoretical, they are already being implemented with promising results. Such mechanisms are being pioneered through initiatives such as the U.S. Energy Transition Accelerator and the Just Energy Transition Partnership. Recent modelling by the Institute for Energy Economics and Financial Analysis (IEEFA) has found that the decommissioning of over 800 coal power plants in emerging economies can be achieved through large-scale investments in renewables and restructured power purchase agreements. All costs would be covered through this market-based approach, including financing PPAs, the development of renewables, retraining workers and upgrading grid infrastructure.[6] 10. Given that market-based approaches are the focus of today’s event, I thought it would be useful for me to outline the key components of such an approach. 11. I would say there are three key components – the three “As”: ambition, arsenal and actors. 12. First, ambition. What is essential here is to ensure strong ambition loops between demand and supply. Market-based approaches work best when demand and supply goals and parameters are aligned. This is a key principle underpinning the work to develop transition credits. Transition credits are a new form of carbon credits that can be generated from the emissions reduced by retiring a coal plant early and transitioning to cleaner energy sources. For this to be a viable financing tool, the supply of transition credits has to be of high integrity. Confidence in the integrity of the credits will reinforce demand. This is where we need to build a virtuous loop of demand and supply to build a market for transition credits.   13. To concretely unpack how this can be achieved, MAS launched the Transition Credits Coalition (TRACTION) at COP28 with more than 30 members. TRACTION is exploring how to support the development of high-integrity supply and build up buyer confidence in transition credits. This means hearing from demand-side players, including sovereigns, corporates and sectoral bodies from both the compliance and voluntary markets. We are asking them what key attributes they look for when purchasing credits.  This, in turn, feeds into TRACTION’s work on the supply side, to identify suitable coal retirement projects for the generation of such credits. 14. Beyond supply and demand, what makes TRACTION different is a third focus on making transactions scalable. This means looking beyond pilots. We are looking to build replicable ambition loops between demand and supply at scale. Part of this involves mapping the risks faced by stakeholders in a transition credit value chain, and identifying ways to mitigate these risks. 15. The second “A” in a strong market-based approach is arsenal. This refers to the need to develop an arsenal of tools and mechanisms to improve the economic viability and risk profile of coal decommissioning projects. Concessional capital is certainly a key tool, but it cannot be our only tool. Market-based approaches use a variety of complementary tools, such as blended finance, technical assistance, guarantees, and carbon credits. Each tool seeks to address a different gap. 16. Applying this to the example on Transition Credits, we need to be receptive to a wide arsenal of approaches even as we address the foundational issue of credit integrity. Several methodologies that prescribe how high integrity transition credits can be generated are being developed as we speak. Some of these are premised on a project-based approach, where the mitigation activity is implemented by each individual coal plant. Others use a sectoral approach where the mitigation activities are managed across a jurisdiction, at the national or subnational level. 17. TRACTION is examining both approaches. Let me share three initial observations: a. First, project-based and sectoral approaches use different guardrails to meet high integrity standards and Just Transition needs. Importantly, these requirements also have to consider implementation practicalities. For instance, project-based methodologies require a just transition plan to be developed at the plant level with stakeholders. Sectoral approach would call for one at the national or subnational level. While the approaches may be different, both stipulate that part of the credit proceeds must be directed to just transition. b. Second, jurisdictions and plant owners should choose a crediting methodology that suits their local context. For example, where there are no site-appropriate options for cleaner energy, a sectoral approach may be considered provided there is a national energy transition plan. c. Third, with multiple approaches under development, stakeholders facing different circumstances will have more options to accelerate a just coal transition action globally. We must recognise that energy transition will not be homogenous as markets have their unique needs for energy security and growth. And the economics of energy transition for each market will also be different. This goes back to my point on the need to have an arsenal of tools. Different methodologies can and should be part of the toolkit to encourage more countries and plant owners to take action today. 18. The final “A” is actors. We need everyone to step up to the plate more decisively. We need better coordination across actors so that those with the ability to step in can quickly plug the gaps. Governments, development finance institutions, and philanthropies could provide concessional capital. Multilateral development banks can provide technical assistance, including advisory and structuring support, and commercial capital. We also need to more extensively harness the capabilities of financial institutions, such as insurance players, to provide innovative risk mitigation solutions across the project development lifecycle. 19. We are starting to see the beginnings of this in the Financing Asia’s Transition Partnership (FAST-P), the US$5bn blended finance platform that we launched at COP28 last year. One specific theme under FAST-P is the Energy Transition Acceleration Fund (ETAF), which is being developed in partnership with the Asian Development Bank (ADB) and the Global Energy Alliance for People and Planet (GEAPP). The fund focusses on energy transition projects in Asia, such as the early phaseout of coal assets and replacement with renewables. The ADB provides not just concessional capital from its donors, but also its structuring expertise, experience in working on the Energy Transition Mechanism in Asia, and a pipeline of potential projects. GEAPP, with its experience in the energy transition, and a network of willing partners with a focus on green energy access, is well placed to ensure that investments in the space are socially inclusive and just. We are also grateful for the World Bank’s partnership in FAST-P. Singapore is working with the International Finance Corporation (IFC) and other partners on a Green Investment Partnership under FAST-P to finance marginally bankable green infrastructure projects and companies in Asia. IFC’s experience in deploying blended finance and scaling infrastructure projects has been invaluable. 20. Market-based approaches are not just a novelty or an interesting talking point. They are a necessity if we are to accelerate the coal transition at the scale we need. For these approaches to work, I have outlined three key “A’s” that are essential: (i) Ambition loops to harness the market-making power of demand and supply, (ii) the ability and willingness to tap on a wide Arsenal of tools, and (iii) a strong ecosystem of Actors that readily step up to play critical roles. 21. I would also add a fourth “A” – Action. I have outlined some concrete workstreams and initiatives that can make decisive impact on coal transition. I hope you will step forward to contribute to this work. 22. With this, I look forward to the panel discussion that will cover a number of innovative market-based approaches, and to the fruitful discussions that will no doubt follow. ***** [1] Ember, 2024 – with major processing by Our World in Data. In 2023, the global electricity production by source is as follows: Coal – 35.51%, Gas – 22.47%, Hydropower – 14.28%, Nuclear – 9.11%, Wind – 7.82%, Solar – 5.53%, Oil – 2.67%, Bioenergy – 2.30%.  [2] International Energy Agency, 2024. CO2 Emissions in 2023.  [3] Centre for Strategic and International Studies, 2023. Clean Energy and Decarbonisation in Southeast Asia: Overview, Obstacles, and Opportunities  [4] International Renewable Energy Agency (IRENA) puts the renewable energy contribution to electricity generation in Southeast Asia in 2019 at 26%, while the Renewable Energy Institute (REI) puts the same figure in 2021at 24.4%.  [5] International Renewable Energy Agency, 2022. Renewable Energy Outlook for ASEAN: Towards a Regional Energy Transition.  [6] Institute for Energy Economics and Financial Analysis, 2024. Accelerating the coal-to-clean transition.  

I am grateful for the educational opportunities this university has afforded my family over the years, including my uncle Samuel DuBois Cook who received his M.A. and Ph.D. here in 1950 and 1953. I am delighted to be here! Today, I would like to discuss the implications of artificial intelligence (AI) for workers and the labor market, more generally.1 I will discuss AI's potential to boost productivity, offer a framework to consider which jobs will be most affected by AI, and consider AI's effect on aggregate employment. I hope this discussion will be informative for many of you in the audience, especially those of you who will be entering the job market in the next few years. However, before discussing AI, I think it will be helpful to first set the stage by reviewing how the labor market has evolved in recent years and where it is today. View of the Labor MarketOn the eve of the pandemic, the labor market was quite strong. The unemployment rate was flirting with historical lows, having fallen to 3.5 percent in the fall of 2019 from an average of 4.7 percent between 2014 and 2019. Jobs were relatively plentiful, with 12 openings for every 10 unemployed job seekers. Then, the labor market changed dramatically in the first few months of the pandemic when economies around the world shut down. By April 2020, nearly one out of every seven U.S. workers was unemployed. The U.S. labor market lost more than 20 million jobs in just two months. To put that into perspective, that is nearly four times the total number of jobs in Ohio. U.S. workers and employers, with the support of timely and extraordinary policy action, proved to be resilient and innovative. As we know from the National Bureau of Economic Research's Business Cycle Dating Committee, the pandemic recession was the shortest on record, even though it was the deepest since the Great Depression. By mid-2020, the economy was growing again. And grow it did. The labor market roared back, gaining 25 million jobs in the three years from its low point in April 2020. Demand for labor outpaced supply such that by mid-2022 there were 20 job openings for every 10 unemployed job seekers. By early 2023, the unemployment rate fell to 3.4 percent, its lowest level in 60 years. In the last year and a half, labor demand has moderated, as restrictive monetary policy helped bring aggregate demand in line with supply and eased inflationary pressure. At the same time, labor supply grew rapidly, and now labor demand and supply are more balanced. While the overall labor market remains solid, it has cooled noticeably this year and is now less tight than it was on the eve of the pandemic. In August, the unemployment rate stood at 4.2 percent, having risen by almost a 1/2 percentage point over the past 12 months. And, in recent months, the number of job openings relative to unemployed job seekers has fallen to just below its pre-pandemic range. As labor demand and supply are now more evenly balanced, it may become more difficult for some individuals to find employment. For example, younger workers could experience more hurdles as they look for that first job that will launch them on a longer career path. Over the past 12 months, the share of 16- to 24-year-olds in the labor force who are unemployed has risen over 1 percentage point, notably larger than the overall increase. Such data are consistent with a report in the most recent Beige Book, a compilation of anecdotal information from around the country shared with Fed officials before our meetings, indicating some recent graduates are facing unexpected difficulties finding suitable jobs.2 It is also the case that less-educated and minority workers could face greater hurdles, as they tend to benefit more from tighter labor markets and suffer more from weakening economic conditions. The slowing of the solid labor market has come alongside a significant easing in inflationary pressure. Inflation was 2.5 percent over the 12 months ending in July, notably closer to our 2 percent target than a year earlier—when inflation was 3.3 percent—and far below its peak of 7 percent in mid-2022. In recent months, the upside risks to inflation have diminished, and the downside risks to employment have increased. In response to these changing conditions, I whole heartedly supported the decision at last week's Federal Open Market Committee (FOMC) meeting to lower our policy interest rate by 1/2 percentage point. The FOMC, of which I am a member, is the Federal Reserve's primary monetary policymaking body. That decision reflected growing confidence that, with an appropriate recalibration of our policy stance, the solid labor market can be maintained in a context of moderate economic growth and inflation continuing to move sustainably down to our target. In thinking about the path of policy moving forward, I will be looking carefully at incoming data, the evolving outlook, and the balance of risks. The return to balance in the labor market between supply and demand, as well as the ongoing return toward our inflation target, reflects the normalization of the economy after the dislocations of the pandemic. This normalization, particularly of inflation, is quite welcome, as a balance between supply and demand is essential for sustaining a prolonged period of labor-market strength. Of course, there will always be new developments and changes that will reshape the labor market. Recent advances in AI technology are perhaps the most talked about and debated of such developments today. I anticipate that these advances may have a significant effect on workers, the labor market, and the economy in coming years. Artificial Intelligence and ProductivityFrom the outset, I, like most of my economist colleagues studying the economics of innovation and AI closely, acknowledge that the implications of AI are highly uncertain. We still do not know what the ultimate magnitude or intensity of this effect will be, which workers and firms will be most affected, or even the time period over which these effects will be realized. But today, I will highlight how economic theory and some recent studies can shed initial light on these critical questions. The key reason why many expect AI will have a substantial effect on the economy is, because AI has the potential to provide a large and sustained boost to labor-productivity growth—which is simply how much output of an individual worker grows over time. Ultimately, growth in output per person, workers' real earnings, and households' real purchasing power can all be tied back to growth in labor productivity. Like many of the most significant technological innovations of the past 200 or so years—such as the steam engine, electricity, computers, and the internet—AI has the potential to affect labor productivity in a plethora of economic activities across many industries and occupations. For instance, over the past few years we have seen dramatic advances in generative AI technologies, which synthesize massive quantities of data to create models that can produce high-quality text, images, and video. Building upon these recent advances, a wide variety of new AI assistants have been deployed to help workers in a broad range of jobs. Although the degree to which these new assistants will improve labor productivity is likely to be quite idiosyncratic, some early studies suggest the effects could be large. One recent study examined the effect of an AI assistant for customer support agents and found that agents using the AI assistant resolved 14 percent more customer issues per hour—with this improvement being most pronounced for workers with comparatively less experience and less formal training.3 But perhaps even more promising is AI's potential for improving our ability to generate new ideas. AI is being used in drug discovery to identify novel chemical compounds; in energy research to extend the duration of a fusion reaction; and in engineering to better understand the aerodynamics of automobiles, airplanes, and ships. If AI can improve our ability to generate new ideas, then it could provide a long-term boost to labor productivity growth, as each newly discovered idea will itself provide an incremental boost to labor productivity. Judging the Effect of Artificial Intelligence on OccupationsBecause of their effects on labor productivity, past technological innovations have resulted in dramatic positive and negative shocks to the demand for specific occupations or tasks. We should expect AI to do the same: eliminating some jobs but, crucially, also creating new ones. As a society, we will need to consider how to retrain and support workers who may be displaced from their jobs, even as many others benefit from AI adoption. As I think about AI's implications for employment in any given job or task, I tend to focus on three questions. How much exposure?First, how exposed is a particular job to AI? It is helpful to think about a job as a set of tasks that the worker must perform. Economist David Autor pioneered this task-based framework for jobs. He used it to demonstrate that the shift in labor demand, which began in the 1970s, away from jobs that involved a large degree of routine tasks can be explained by these jobs' greater exposure to the rapid adoption of computerization and automation technologies.4 We can take a similar task-based approach to determine a job's exposure to AI. Start by considering what share of a job's tasks can be performed by AI. For example, we might expect AI to be able to perform a larger share of a software programmer's tasks versus those of a plumber. Next, for those tasks that can be performed by AI, consider how well AI performs them relative to a typical worker. For instance, generative AI is used in a medical setting to summarize patient interviews—a task that it performs quite well relative to a human doctor. Based on that interview, AI could diagnose a patient and develop a treatment plan, but these are tasks that doctors still tend to perform better than AI. Finally, for those tasks that can be performed by AI, think about the quality threshold required for that job task. Coming back to the example of a doctor and AI, while there may be some tolerance for incorrectly summarizing a patient interview, there is little tolerance for misdiagnosing a patient or developing a bad treatment plan. I would also note that we may have higher quality thresholds for AI than we do for human workers—with driverless cars being an example where AI drivers may be held to a higher standard than human drivers. Thus, a job will be more exposed to AI, if AI can perform a large share of the job's tasks sufficiently well relative to a human worker and a set of quality thresholds. Importantly, we can expect that a job's exposure to AI will change over time, because advances in AI technology will both expand the set of tasks that AI can perform and improve the quality of AI's performance of those tasks. Which brings me to my second question for AI's implications for any given job. Complement or substitute?Will AI be a complement to or a substitute for the job, given its set of tasks? AI is more likely to serve as a complement to jobs that have less exposure to AI but use the services or products that are produced by jobs with a high degree of AI exposure. For instance, a job as a litigator may have little direct exposure to AI but will benefit from AI's ability to assist with legal research.5 Even for some jobs with a high degree of exposure to AI, it is possible for AI to serve as a complement. Let's return to the example of the doctor, who may now see more patients or spend more time on diagnoses, because AI has taken over writing summaries of patient interviews. More broadly, jobs with a high degree of exposure to AI will likely be complemented by AI, if workers are able to offload time-intensive, but low value-added, tasks to AI and focus their time on the highest value-added tasks. However, we can expect that there will be some jobs that have a high degree of exposure to AI and for which AI can perform some especially high-valued tasks. Thus, AI may be more of a substitute for human labor in these jobs. But even for these jobs, the employment implications are ambiguous and will depend on the third question. What is the elasticity of demand?What is the price elasticity of demand for the output of these jobs that are highly affected by AI? To understand what I mean, it is helpful to consider a concrete example. I want to come back to the software programmer jobs that I mentioned before as having a high degree of exposure to AI. Recent advances in generative AI have resulted in the development of new AI-powered coding assistants that help automate some aspects of writing software code. Some early studies have found that these AI coding assistants can provide a significant boost to programmers' productivity. One randomized controlled trial found that these AI coding assistants cut in half the amount of time it took to finish a small programming project.6 Another study found that programmers who were randomly assigned to use an AI coding assistant submitted 20 percent more requests each week asking to add code they had written to a software project.7 And I emphasize that these tools are still in their infancy, which suggests that the productivity gains for software-programming jobs may be even larger. These productivity enhancements will allow software programming projects to be delivered in less time and at a lower cost. As we know from economic theory, as the costs and delivery times for software projects fall, demand for such projects should increase. The number of software-programming jobs will depend on whether the demand for software projects increases more than one for one with the decrease in cost. In other words, is the price elasticity of demand for software projects greater than one? If it is, then the reduction in software programmers' hours devoted to programming tasks that can now be performed by AI will be more than offset by the increase in their hours from the greater demand for AI-enhanced software programming. I find these questions helpful for framing how to think about AI's implications for any job or set of tasks. While I mentioned that there will likely be benefits for certain workers, it is important to recognize a universal lesson from past technological innovations—namely, that the employment and earnings of some workers are likely to be negatively affected by these innovations. The magnitude and extent of these negative effects will depend on a variety of factors. For instance, consider if AI is able to perform job tasks that previously required a high degree of training or specialization. Affected workers in these jobs could experience larger declines in their earning power, if AI depreciates the value of their accumulated human capital. The degree to which AI could negatively affect some workers' earnings and employment will also be influenced by the pace of AI adoption. It is possible that if AI adoption is rapid, we could see the effects on some workers come quickly and be more concentrated, depending on which sectors are early adopters. Implications of Artificial Intelligence for Aggregate EmploymentIn addition to considering AI's effects on individual workers, economists also evaluate AI's implications for aggregate employment. As I discussed, it remains unclear whether AI will be a boon for or a drag on net employment for those jobs that are most directly affected by AI. For workers who are not directly exposed to AI but, rather, are users of the output from AI-exposed jobs, the aggregate employment implications are more likely to be positive. Generally, these downstream jobs will benefit from the lower input costs that result from greater productivity realized by AI-exposed jobs. An exception might be jobs where the cheaper inputs are a substitute for labor in the downstream job. Moreover, I anticipate that inventors and innovators will continue to discover new products and services that are enabled by AI. The companies that are then formed to deliver these new products and services can be expected to raise aggregate employment. In light of the uncertainty regarding AI's implications for the labor market, I want to highlight the important role that decisions by firms and, to a lesser extent, workers can have for determining how AI will affect the labor market. If incumbent firms are able to adjust their processes to capture productivity benefits from AI, then these firms could help mitigate some of AI's potential for job displacement by internally reallocating affected workers to new roles and providing necessary training. If some job tasks can be replaced with AI—especially those that are mundane and repetitive—workers may be freed up to focus on other tasks or new activities they find more rewarding. Individual workers play a limited role in determining how AI will affect their earnings and employment. Workers in jobs that will be complemented by AI might benefit from familiarizing themselves with how to effectively use AI. Workers in jobs where AI will be able to perform a substantial share of their tasks will face greater challenges. Some of these workers may seek to develop expertise in the aspects of their jobs for which AI is particularly ill-suited. Yet, many of these more-exposed workers may need to invest in training in alternative occupations that are less exposed to AI, similar to some of the skill-retraining efforts for manufacturing workers over the past 50 years. ConclusionIn closing, I suspect that the tremendous uncertainty I highlighted related to AI's implications for the labor market will be some combination of disconcerting and exciting for many in the audience, especially those who will be graduating and launching their careers in the coming years. My recommendation to you is to take the time to experiment with AI, familiarizing yourself with its capabilities and limitations. Doing so will make you well placed to help your future employers—and that could include yourselves—transform their business processes to effectively use AI. And for the smaller subset of you who are purely excited about the opportunity presented by AI, I look forward to seeing the innovative new products and services you create and disseminate throughout the economy to raise the living standards for all Americans. Thank you for having me at The Ohio State University. I look forward to your questions. 1. The views expressed here are my own and not necessarily those of my colleagues on the Federal Open Market Committee.  2. The August 2024 Beige Book is available on the Board's website at https://www.federalreserve.gov/monetarypolicy/files/BeigeBook_20240904.pdf.  3. See Erik Brynjolfsson, Danielle Li, and Lindsey R. Raymond (2023), "Generative AI at Work," NBER Working Paper Series 31161 (Cambridge, Mass.: National Bureau of Economic Research, April; revised November).  4. See David H. Autor, Frank Levy, and Richard J. Murnane (2003), "The Skill Content of Recent Technological Change: An Empirical Exploration," Quarterly Journal of Economics, vol. 118 (November), pp. 1279–1333.  5. See Bloomberg Industrial Group (2024), "How Is AI Changing the Legal Profession?" Bloomberg Law, May 23.  6. See Sida Peng, Eirini Kalliamvakou, Peter Cihon, and Mert Demirer (2023), "The Impact of AI on Developer Productivity: Evidence from GitHub Copilot," working paper, February.  7. See Kevin Zheyuan Cui, Mert Demirer, Sonia Jaffe, Leon Musolff, Sida Peng, and Tobia Salz (2024), "The Productivity Effects of Generative AI: Evidence from a Field Experiment with GitHub Copilot," An MIT Exploration of Generative AI (Cambridge, Mass.: Massachusetts Institute of Technology, March). 

The Securities and Exchange Commission today announced Cassava Sciences, Inc., its founder and former CEO, Remi Barbier, and its former Senior Vice President of Neuroscience, Dr. Lindsay Burns, will pay more than $40 million to settle charges related to misleading statements made in September 2020 about the results of a Phase 2 clinical trial for the company’s purported therapeutic for the treatment of Alzheimer’s disease. In a related order, the SEC charged Cassava consultant, Dr. Hoau-Yan Wang, an associate medical professor at the City University of New York’s Medical School and the therapeutic’s co-developer, for manipulating the reported clinical trial results. According to the SEC’s order, Wang received information that unblinded him to some aspects of the Phase 2 clinical data, which he used to identify about a third of the patients enrolled in the trial. In a blinded clinical trial, to avoid bias in the results, no one involved in the trial knows the treatment assignment of individual patients, including whether the patient received a placebo or an active dose of the therapeutic. Using information that unblinded him to aspects of the trial data, Wang was able to manipulate the data to create the appearance that the drug had caused dramatic improvements in biomarkers associated with Alzheimer’s disease, such as total tau and phosphorylated tau, which are common indicators of neurodegeneration in Alzheimer’s patients. The order also finds that Wang knew Cassava would disclose the manipulated data when announcing the results of its Phase 2 clinical trial, and Cassava did in fact publicize the data in a press release and investor deck issued on September 14, 2020. The SEC’s related civil complaint alleges that Cassava and Burns misled investors with claims that the Phase 2 trial was conducted in blinded conditions, even though Wang had been unblinded. The SEC’s complaint further alleges that Cassava misled investors by announcing that the company’s therapeutic significantly improved patient cognition. Among other things, Cassava claimed that the Phase 2 results showed significant improvement in episodic memory of the Alzheimer’s patients involved in the clinical trial. In reporting the results, however, Cassava failed to disclose that the full set of patient data – as opposed to the subset of data hand-selected by Burns – showed no measurable cognitive improvement in the patients’ episodic memory. Cassava and Barbier also failed to disclose Wang’s role in the clinical trial, despite his personal, financial, and professional interest in the therapeutic’s success. “Our capital markets can and should be a powerful engine for innovation in the development of new and potentially life-altering therapeutics,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement. “Today’s actions – which include charges against senior executives and significant monetary relief against Cassava – reflect our commitment to upholding public confidence in the market’s ability to accelerate legitimate scientific advances.” The SEC’s complaint, filed in the U.S. District Court for the Western District of Texas, charges Cassava, Barbier, and Burns with violating antifraud provisions of the federal securities laws and charges Cassava with violating reporting provisions of the federal securities laws. Without admitting or denying the allegations, Cassava, Barbier, and Burns consented to civil injunctions against future violations and agreed to pay civil penalties of $40 million, $175,000, and $85,000, respectively. Barbier and Burns agreed to be subject to officer-and-director bars of three and five years, respectively. The settlements are subject to court approval. The SEC’s order alleges that Wang violated antifraud provisions of the federal securities laws and that he aided and abetted Cassava’s violations of the reporting provisions. Without admitting or denying the violations, Dr. Wang consented to cease and desist from future violations and to pay a $50,000 penalty. The SEC’s investigation was conducted by Matthew Spitzer, Ernesto Amparo, and Zachary Avallone and was supervised by Sarah Hall, Melissa Armstrong, and Mr. Cave. Eugene Canjels from the Commission’s Division of Economic Risk and Analysis provided assistance. Resources SEC Order SEC Complaint

The Securities and Exchange Commission today announced settled charges against Florida-based GQG Partners LLC, a registered investment adviser, for entering into agreements with candidates for employment and a former employee that made it more difficult for them to report potential securities law violations to the SEC.   According to the SEC’s order, from November 2020 through September 2023, GQG entered into non-disclosure agreements with 12 candidates for employment that prohibited them from disclosing confidential information about GQG, including to government agencies. While the agreements permitted the candidates to respond to requests for information from the Commission, it required notification to GQG of any such request and prohibited responding to requests arising from a candidate’s voluntary disclosure. The SEC’s order finds that GQG also entered into a settlement agreement with a former employee whose counsel had told GQG that he or she intended to report alleged securities law violations to the Commission. Specifically, the settlement agreement said that it permitted reporting possible securities law violations to government agencies, including the Commission; however, it also required the former employee to affirm that he or she had not done so; was not aware of facts that would support an investigation; and would withdraw any statements already made that might support an investigation. These provisions violated the whistleblower protection rule. “Whether through agreements or otherwise, firms cannot impose barriers to persons providing evidence about possible securities law violations to the SEC, as GQG did,” said Corey Schuster, Co-Chief of the Division of Enforcement’s Asset Management Unit. “Even agreements that contain carve-out language allowing people to voluntarily report to the SEC can be violative if restrictive language in a separate provision impedes voluntary reporting to the Commission staff.” The SEC’s order finds that GQG violated whistleblower protection Rule 21F-17(a), which prohibits any action to impede an individual from communicating directly with the SEC staff about a possible securities law violation. Without admitting or denying the SEC’s findings, GQG agreed to be censured, to cease and desist from violating the whistleblower protection rule, and to pay a $500,000 civil penalty. The SEC’s investigation was conducted by Marie DeBonis, Marilyn Ampolsk, and Brian Fitzpatrick, and supervised by Virginia Rosado Desilets, Mr. Schuster, and Andrew Dean, all of the Asset Management Unit.        Resources SEC Order

Interest rate derivative trading will cease at 1:30 p.m. today, September 27, 2024. Furthermore, the interest rate derivative market will be closed on September 30, 2024.

The Securities and Exchange Commission today charged DraftKings Inc. with selectively disclosing material, nonpublic information to investors who followed or otherwise viewed the company CEO’s social media accounts without disclosing that same information to all investors, in violation of Regulation Fair Disclosure (FD). DraftKings agreed to pay a $200,000 civil penalty to settle the SEC’s charges. The order finds that, on July 27, 2023, at 5:52 p.m., DraftKings’ public relations firm published a post on the personal X account of the DraftKings CEO. The post, according to the order, stated that the company continued to see “really strong growth” in states where it was already operating. DraftKings’ public relations firm posted a similar statement that same day on the CEO’s LinkedIn account. At the time of the posts, DraftKings had not yet disclosed its second quarter 2023 financial results, nor had it otherwise publicly disclosed certain information contained in the posts. Shortly after the public relations firm published the posts, it removed both posts at the request of DraftKings. According to the order, even though Regulation FD required DraftKings to promptly disclose the information to all investors after it was selectively disclosed to some, DraftKings did not disclose the information to the public until seven days later when it announced its financial earnings for the second quarter of 2023. “Information about growth in sales as a public company can be extremely important to investors,” said John Dugan, Associate Director for Enforcement in the SEC’s Boston Regional Office. “It is essential that, when companies disseminate material, nonpublic information, they do so fairly to all investors.” The order charges DraftKings with violations of Section 13(a) of the Exchange Act and Regulation FD. Without admitting or denying the order’s findings, DraftKings agreed to cease and desist from future violations of the charged provisions, pay the civil penalty referenced above, and comply with certain undertakings, including required Regulation FD training for employees who have corporate communications responsibilities. The SEC’s investigation was conducted by Jonathan Menitove, Colin Forbes, Patrick Noone, Sean Fishkind, and Kathleen Shields, and supervised by Celia Moore of the SEC’s Boston Regional Office. While companies can use social media outlets to announce key information in compliance with Regulation FD, investors must first have been alerted about which social media will be used to disseminate such information. For more information, see SEC Says Social Media OK for Company Announcements if Investors Are Alerted. Resources SEC Order

MIAX Options will adjust the monthly Market Maker Incentive Program (the “Incentive Program”) for SPIKES Options with new terms beginning October 1, 2024, and ending January 31, 2025. Please refer to MIAX Options Regulatory Circular 2024-54 for details regarding the Incentive Program.Please contact MIAX Trading Operations at TradingOperations@MIAXOptions.com or (609) 897-7302 with any questions. Direct Regulatory inquiries to Regulatory@MIAXOptions.com or (609) 897-7309.

The Commodity Futures Trading Commission today issued an order simultaneously filing and settling charges against CHS Hedging, LLC, a Minnesota based futures commission merchant, for recordkeeping deficiencies and failure to obtain customer authorizations before entering trades for customers. The order requires CHS Hedging, LLC, to pay a $650,000 civil monetary penalty. The respondent admits the facts related to its recordkeeping deficiencies as detailed in the order and is ordered to cease and desist from further violations of the Commodity Exchange Act and CFTC regulations, as charged. In accepting CHS’s Offer, CFTC recognizes CHS’s self-reporting and cooperation in connection with this Division of Enforcement’s investigation. Case Background The order finds from June 21, 2019, to Sept. 2, 2023, CHS used at least three different recording platforms to make or keep audio recordings of communications by its associated persons (APs) with CHS customers. At various points during that time, these platforms suffered from deficiencies or other issues resulting in CHS’s failure to make or keep approximately 3,000 audio recordings of its APs calls with CHS customers. These calls would have included communications concerning quotes, solicitations, bids, offers, instructions, trading, and/or prices leading to transactions in commodity interests. Additionally, the order finds during this time, CHS, through three of its APs, placed 75 trades for seven customers without a power of attorney and without obtaining specific information from customers about the quantity and/or precise commodity interest to be purchased or sold. The order also acknowledges CHS’s representations concerning its remediation in connection with this matter. The Division of Enforcement staff responsible for this matter are James Deacon, Alison Wilson, and Rick Glaser. RELATED LINKS Order: CHS Hedging, LLC

The Commodity Futures Trading Commission is requesting public comment on a rule certification filing by KalshiEX LLC, which would amend its rulebook to include rules for a request for quote functionality and amendments to its prohibited transactions rule. Comments must be submitted on or before Oct. 28, 2024. The Division of Market Oversight has determined to stay Kalshi Submission No. 2409-1100-4224-55, dated September 11, 2024, pursuant to Section 5c(c)(2) of the Commodity Exchange Act (CEA) and § 40.6(c)(1) and § 40.7(a)(2) of the CFTC’s regulations. As set forth in the stay notification letter, this determination was made because the submission presents novel or complex issues that require additional time to analyze and is potentially inconsistent with the CEA or the CFTC’s regulations. The CFTC has 90 days to review the submission, until the end of Dec. 23, 2024. The public comment period opens on Sept. 26, 2024 and closes on Oct. 28, 2024. Comments may be submitted electronically through the CFTC’s comments online process. All comments will be posted on CFTC.gov. The Kalshi submission is available under Industry Filings. RELATED LINKS KalshEX Stay Notification Letter CFTC Comments Online

The Senior Credit Officer Opinion Survey on Dealer Financing Terms (SCOOS) is a quarterly survey providing information about the availability and terms of credit in securities financing and over-the counter (OTC) derivatives markets. The SCOOS is modeled after the long-established Senior Loan Officer Opinion Survey on Bank Lending Practices, which provides qualitative information about changes in supply and demand for loans to households and businesses at commercial banks. The SCOOS collects qualitative information on credit terms and conditions in securities financing and OTC derivatives markets, which are important conduits for leverage in the financial system. The survey panel for the SCOOS began by including 20 dealers and over time has been expanded. These firms account for almost all of the dealer activity in dollar-denominated securities financing and OTC derivatives markets. The survey is directed to senior credit officers responsible for maintaining a consolidated perspective on the management of credit risks. The HTML links below include the full report; the PDF links include the summary only. 2024 September* HTML | PDF June HTML | PDF March HTML | PDF 2023 December HTML | PDF September HTML | PDF June HTML | PDF March HTML | PDF 2022 December HTML | PDF September HTML | PDF June HTML | PDF March HTML | PDF 2021 December HTML | PDF September HTML | PDF June HTML | PDF March HTML | PDF 2020 December HTML | PDF September HTML | PDF June HTML | PDF March HTML | PDF 2019 December HTML | PDF September HTML | PDF June HTML | PDF March HTML | PDF 2018 December HTML | PDF September HTML | PDF June HTML | PDF March HTML | PDF 2017 December HTML | PDF September HTML | PDF June HTML | PDF March HTML | PDF 2016 December HTML | PDF September HTML | PDF June HTML | PDF March HTML | PDF 2015 December HTML | PDF September HTML | PDF June HTML | PDF March HTML | PDF 2014 December HTML | PDF September HTML | PDF June HTML | PDF March HTML | PDF 2013 December HTML | PDF September HTML | PDF June HTML | PDF March HTML | PDF 2012 December HTML | PDF September HTML | PDF June HTML | PDF March HTML | PDF 2011 December HTML | PDF September HTML | PDF June HTML | PDF March HTML | PDF 2010 December HTML | PDF September HTML | PDF June HTML | PDF *Current Release

The Canadian Securities Administrators (CSA) is providing a further update for crypto asset trading platforms (CTPs) that are registered, or that provided a pre-registration undertaking (PRU), about the application of terms and conditions in the CTPs’ registration and exemptive relief decisions or PRUs related to value-referenced crypto assets (VRCAs).Investors have experienced significant harm from the collapse of unregulated VRCAs, other VRCA market disruptions and the activities of unregistered crypto market participants. While other international jurisdictions are developing payment-based, banking-based or hybrid regulatory regimes for certain types of VRCAs, the CSA is not aware of any such regulated VRCAs being traded in Canada. Nor is the CSA aware of any initiatives to develop similar regulatory regimes in Canada that would address a VRCA issuer’s financial condition, conduct and public disclosure. As a result, we continue to have investor protection concerns with the trading of these investment products in Canada.Recognizing that VRCAs may have certain uses for the Canadian clients of CTPs, the CSA’s approach, described in CSA Staff Notice 21-333 Crypto Asset Trading Platforms: Terms and Conditions for Trading Value-Referenced Crypto Assets with Clients (the Staff Notice), reflected a willingness to allow the continued trading of certain VRCAs that are referenced to the value of a single fiat currency (fiat-backed crypto assets, or FBCAs). The Staff Notice described terms and conditions that would address the CSA’s investor protection concerns. (the Staff Notice), reflected a willingness to allow the continued trading of certain VRCAs that are referenced to the value of a single fiat currency (fiat-backed crypto assets, or FBCAs). The Staff Notice described terms and conditions that would address the CSA’s investor protection concerns.The Staff Notice included a deadline of April 30, 2024 by which the CSA expected that CTPs would no longer allow clients to buy, deposit, or enter into crypto contracts to buy or deposit FBCAs that do not comply with the applicable terms and conditions. As part of the CSA’s ongoing engagement with Canadian crypto market participants on the implementation of these terms and conditions, and in response to technical issues CTPs raised with meeting the April 30 deadline, the CSA extended the April 30 deadline to October 31, 2024 and invited submissions on the appropriate long-term regulation of VRCAs.The CSA has actively engaged with CTPs and crypto industry participants and remains open to proposals for alternative ways to address investor protection concerns raised by VRCAs. To that end, the CSA is further extending the October 31 deadline to December 31, 2024. The extension is intended to provide more time for CTPs to either comply with the terms and conditions of their registration and exemptive relief decisions, or their PRUs, or to propose alternatives that address investor protection concerns, as long as any alternatives are in place or substantially finalized prior to December 31, 2024. The CSA also remains open to considering exemptions relating to specific use cases for VRCAs that do not raise investor protection concerns. CTPs and VRCA issuers should contact their principal regulator if they wish to discuss any such alternatives or use cases.After December 31, 2024, registered CTPs or CTPs that provided a PRU can only offer VRCAs that comply with the conditions of their registration and exemptive relief decisions, or their PRUs.For clarity, CTPs are also reminded that they were required to no longer allow clients to buy, deposit or enter into crypto contracts to buy or deposit VRCAs other than certain FBCAs by December 29, 2023. This requirement is not affected by the extension of the October 31 deadline to December 31, 2024.Investors are reminded that holding a VRCA or a crypto contract with a CTP does not offer the protections generally afforded to holding regulated deposits. Investors wishing to hold VRCAs risk losing all of their investment, or of having to sell at a loss instead of redeeming directly from the issuer on a 1:1 basis.   The CSA cautions Canadian investors that all crypto assets, including any VRCAs, carry risk, and are not the same as fiat currency (such as the Canadian dollar, the U.S. dollar or the Euro). Even if a specific VRCA meets the terms and conditions of an applicable registration, exemptive relief decision or PRU, it does not mean the CSA approves or endorses the VRCA, endorses its safety, or that it is compliant with Canadian securities laws. To learn more about crypto assets, visit the CSA’s Investor Tools Crypto Assets page. The CSA, the council of the securities regulators of Canada’s provinces and territories, coordinates and harmonizes regulation for the Canadian capital markets.The British Columbia Securities Commission did not participate in this news release due to publication restrictions related to the upcoming B.C. provincial election.

Thank you for the kind introduction. As is customary, I’d like to note that I’m not speaking on behalf of my fellow Commissioners or the SEC staff. I’m honored to be speaking with you today following Secretary Yellen, under whose leadership we are in the midst of much needed reforms of our Treasury market. I think our nation’s first Treasury secretary, Alexander Hamilton, would tip his tricorn hat to his 77th successor, for focusing on the efficiency and resiliency of the Treasury market. A couple hundred years before he became a Broadway star, in 1790, Hamilton told Congress that “the proper funding of the present debt, will render it a national blessing.”[1] Hamilton’s prophecy has turned out to be prescient. Treasuries are called “risk-free assets,” not just here in the U.S. but around the globe. They are the base upon which our entire capital markets are built. The U.S. Treasury markets play an integral role in the dollar’s dominance. They are how we, as a government and as taxpayers, raise money to fund roads, bridges, and public universities. We are the issuer. They are integral to how the Federal Reserve conducts monetary policy. Given the magnitude, leverage, and importance of the Treasury markets, as policymakers, we need to promote efficiency in these markets. Further, over the years, all too often, we’ve seen tremors in these markets. In 2014, we had a “Flash Rally.”[2] In the fall of 2019, the Treasury funding markets again experienced real stress.[3] We all recall the significant “dash-for-cash" in the Treasury market back in 2020, at the beginning of the COVID-19 crisis. While not as significant, we saw jitters again when some regional banks were failing in 2023. This is not a new phenomenon. I witnessed it during my early days on Wall Street when a dozen government securities dealers failed in the 1980s. Given the magnitude, leverage, and importance of the Treasury markets, as policymakers, we can’t ignore these tremors.[4] Clearance and Settlement While clearinghouses do not eliminate all risk, they do lower it. They facilitate what one might call the market plumbing, that which happens after you execute a transaction through the time that it settles. First, clearinghouses do so by sitting in the middle and reducing the risks amongst and between counterparties. They also provide multilateral netting, which helps lower the overall margin (collateral) needed to be posted in the system. Further, central clearing reduces risks through the robust rules of the clearinghouses themselves, including for the collection of initial and variation margin. After those tremors in the Treasury market in the 1980s, Congress worked with President Reagan and the 65th Treasury Secretary Jim Baker to set up a federal regulatory regime for government securities dealers, brokers, and clearinghouses. A few weeks later, the first clearinghouse for government securities was incorporated. I might note that since the beginning in 1986, Treasury transactions were settled on a T+1 basis. Speaking of T+1, back in May, the U.S. smoothly shortened the standard settlement cycle for equities, corporate bonds, and municipal securities to one day after the transaction date.[5] This was a win for investors, who will no longer need to wait two days to get their money when they sell stocks. It’s a win for resiliency as it lowers risk in the system. Transitioning to T+1 was a team sport. Thousands of market participants—from the clearinghouse, depositories, custodian banks, broker dealers, investment advisers, self-regulatory organizations, stock exchanges, service providers, and industry groups—worked, along with SEC staff, to make the transition happen smoothly. Back to Treasury clearing, by 2022, only “approximately 20 percent of all repo and 30 percent of reverse repo is centrally cleared.”[6] Further, inter-dealer brokers (IDBs), which sit in the middle of these cash markets, often are bringing just one side of the trades on their platforms into central clearing. Thus, in December 2023, the SEC adopted rules to facilitate additional central clearing for the U.S. Treasury markets.[7] First, in March 2025, the separation of house and customer margin must be completed, ensuring that clearinghouses facilitate indirect participants as well. When posting margin to the clearinghouse, members no longer will be able to net their customers’ positions against their own proprietary positions. This will better protect customers as well as the clearinghouse itself. Further, I think it could enhance competition as broker-dealers will no longer be able to use their customer positions to lower the margin they post to the clearinghouse. The rules also allow for customer margin collected by broker-dealers to be onward posted to the clearinghouse under certain conditions. Allowing such rehypothecation helps both protect customers and free up broker-dealers’ resources. Market participants have experience with similar rules regarding both gross margining and rehypothecation in the swaps, options, and derivatives markets. Further, providing clearing for so-called “done-away” transactions can be an important component of promoting access and competition in the markets. To facilitate access to markets, it’s important that clearinghouses and their clearing members promote the ability for market participants to trade anonymously with the confidence that they will have access to central clearing on both sides of the trade. This helps promote all-to-all trading as well as the efficiency and resiliency of central clearing itself. To achieve this, there should be provision of clearing services such that it doesn’t matter with whom one does a trade. Subsequent to the SEC adopting the Treasury clearing rules, The Fixed Income Clearing Corporation (FICC) filed proposed rule changes intended to meet the requirements to separate house and customer margin as well as regarding customer access. The Commission has received numerous comments and continues to engage with market participants on the issues raised in FICC’s proposal. The Commission must approve or disapprove these rules by November. More generally, Commission staff are monitoring various projects in which market participants are engaged in advance of increased central clearing in the U.S. Treasury market. Such projects include the development of standard documentation for each access model, the appropriate accounting treatment for each access model, and possible cross-margining between Treasury cash positions and Treasury futures positions for clients. Staff also are monitoring the development of additional methods by which registered investment companies will access central clearing. Second, the SEC’s final rules broaden the scope of which transactions clearinghouse members must clear. Starting at the end of 2025, the final rules mandate that clearinghouses require their members clear any Treasury cash trades executed on an IDB platform, with registered broker-dealers, or with registered government securities broker-dealers. Starting June 2026, the final rules require clearinghouses in the Treasury markets to ensure that their members clear all their repo and reverse repo transactions. It has been reported that there may be new entrants considering offering central clearing in the Treasury markets. We at the SEC stand ready to consider any applications to do so. Transaction volume at the clearinghouse is already increasing. Earlier this month, FICC announced that its yearly volume was up 42 percent. On September 3, they set a new record clearing $9.2 trillion in daily activity. [8] Dealer-Trader As I mentioned, when I was a young associate on Wall Street, a dozen government securities dealers failed, leading to President Reagan and Congress giving this agency important authorities over the Treasury markets. I remember my colleagues and myself processing what had happened, as well as potential effects on the markets and the economy. Drysdale, which was not registered or regulated as a dealer, had significant involvement in the U.S. Treasury markets. It also was highly leveraged. The firm had only $30 million in capital yet managed a portfolio as large potentially as $4 billion.[9] Yet, when I arrived at the SEC in 2021, I was told that though some firms have registered with the SEC as government securities dealers or broker-dealers, some market participants have not. I think that leaves potential regulatory gaps and risk in the system. The markets also have evolved in other ways, such as electronification, the use of algorithmic trading, and market participants transacting faster than ever before. Some market participants, such as principal-trading firms (PTFs) that use high-frequency trading strategies, started participating significantly in the Treasury cash market. In 2019, for example, PTFs represented around 60 percent of the volume on the IDB platforms in the Treasury markets.[10] In essence, these PTFs and other firms are acting in a manner consistent with dealers in the securities markets. Nevertheless, despite these firms acting as de facto market makers, and despite their regularity of participation consistent with buying and selling securities or government securities for their own account “as a part of a regular business,” a number of these firms have not registered with the Commission as dealers. This deprives investors and the markets themselves of important protections—protections that benefit market integrity, resiliency, transparency, and more. Thus, the Commission earlier this year adopted final rules to further define what it means to be part of a regular business, as the dealer definition provides, in these circumstances.[11] Firms that act as dealers are required to register with the Commission as dealers, thereby protecting investors as well as promoting market integrity, resiliency, and transparency. Exchanges and Alternative Trading Systems Reflecting the electronification and other significant changes in the Treasury markets over the years, the Commission proposed rules to require platforms that provide marketplaces for Treasuries to register as broker-dealers and to comply with Regulation Alternative Trading System (ATS).[12] It was the dawn of the internet, when Bob Rubin was 70th Treasury Secretary and Arthur Levitt served as the 25th SEC Chair. Under Levitt’s leadership, in responses to new trading models, the SEC in 1998 first adopted Regulation Alternative Trading Systems.[13] At the time, Treasury trading platforms were exempted from these regulations. A lot, though, has changed in the capital markets in the intervening 26 years. Much of the secondary markets in Treasuries are now facilitated by electronic trading platforms. The Commission’s proposal, if adopted, would require registration of certain trading platforms in the Treasury markets. It would bring Treasury trading platforms with significant volume under Regulation Systems Compliance and Integrity, a rule that protects for the resiliency of technology infrastructure.[14] It also would require these platforms to comply with the Fair Access Rule, which provides for fair access to platforms and would prohibit platforms from making unfair denials or limitations of access. This update would close a regulatory gap among platforms. Transparency Before I close, I want to discuss a couple of items related to transparency. Earlier this year, we approved a Financial Industry Regulatory Authority (FINRA) rule change to enhance post-trade transparency in the Treasury markets.[15] The FINRA rule, for the first time, will provide the public with post-trade transparency in the Treasury markets on a trade-by-trade basis, rather than on an aggregated basis. The scope of what will be published to the public will include a trade’s time, price, direction, venue, and size. Further, we approved amendments last year to modernize a rule regarding which broker-dealers must register with FINRA, which will enhance cross-market and off-exchange oversight for some of the most active participants in the capital markets.[16] Conclusion From Hamilton to Baker to Rubin to Yellen, each understood the importance of the U.S. Treasury markets. Much has changed since Hamilton’s era — after all, he didn’t see the dawn of the internet and modern technology. I’d like to think, though, he would have shared Secretary Yellen’s knack for playing Candy Crush Saga. The challenge in our times is to bring reforms to ensure that they are as efficient and resilient as they can be. It's critical to taxpayers, to the capital markets, to monetary policy, and the role of the dollar around the globe. [1] See Alexander Hamilton, “Report Relative to a Provision for the Support of Public Credit” (Jan. 9, 1790), available at https://founders.archives.gov/documents/Hamilton/01-06-02-0076-0002-0001. [2] During this 12-minute period, the yield on the 10-year U.S. Treasury bond dropped and recovered an extraordinary 1.6 percent. See National Library of Medicine, “The October 2014 United States Treasury bond flash crash and the contributory effect of mini flash crashes” (Nov. 1, 2017), available at https://tinyurl.com/yfz677sx. [3] See The Federal Reserve, “What Happened in Money Markets in September 2019?” (February 2020), available at https://www.federalreserve.gov/econres/notes/feds-notes/what-happened-in-money-markets-in-september-2019-20200227.html. [4] Another characteristic of the Treasury markets is the use of leverage often facilitated by prime brokerage relationships between hedge funds and nonbank intermediaries on the one hand and banks and broker-dealers on the other. In a study of non-centrally cleared bilateral repo data collected in June 2022, the Office of Financial Research said that 74 percent of volume covered by the pilot study was transacted at zero haircut. See Office of Financial Research “OFR’s Pilot Provides Unique Window Into the Non-centrally Cleared Bilateral Repo Market” (Dec. 5, 2022), available at https://www.financialresearch.gov/the-ofr-blog/2022/12/05/fr-sheds-light-on-dark-corner-of-the-repo-market/. [5] See Securities and Exchange Commission, “Shortening the Securities Transaction Settlement Cycle” (August 2024), available at https://www.sec.gov/investment/settlement-cycle-small-entity-compliance-guide-15c6-1-15c6-2-204-2.  [6] See Federal Reserve, “Insights from revised Form FR2004 into primary dealer securities financing and MBS activity” (Aug. 5, 2022), available at https://tinyurl.com/3yrp9bnj. As it relates to cash transactions, by 2017, only 13 percent of Treasury cash transactions were fully centrally cleared. See Treasury Market Practice Group, “White Paper on Clearing and Settlement in the Secondary Market for U.S. Treasury Securities” (July 11, 2019), available at https://www.newyorkfed.org/medialibrary/Microsites/tmpg/files/CS_FinalPaper_071119.pdf. [7] See Securities and Exchange Commission, “SEC Adopts Rules to Improve Risk Management in Clearance and Settlement and Facilitate Additional Central Clearing for the U.S. Treasury Market” (Dec. 13, 2023), available at https://www.sec.gov/news/press-release/2023-247. [8] See Depository Trust & Clearing Corporation, “FICC’s Government Securities Division Clears Record-Setting USD$9.2 Trillion in Daily Activity” (September 2024), available at https://www.dtcc.com/news/2024/september/09/ficcs-government-securities-division-clears-record-setting/. [9] “Unraveling the mystery at Drysdale Government Securities, a company that had only $30 million in capitalization, is proving complicated. … On a $4 billion portfolio, which is the size of portfolio most analysts believe Drysdale was running, this strategy would have produced modest profits or losses.” See Ron Scherer, “How Drysdale affair almost stymied US securities market” (May 27, 1982), available at https://www.csmonitor.com/1982/0527/052737.html. See also James L. Rowe Jr. and Merrill Brown, “Through Abrupt Personality Change, Tiny Wall Street Firm Demonstrates the Allure, and Danger, in Speculative Trading” (May 23, 1982), available at https://tinyurl.com/477zmj3n. “On Tuesday, Drysdale Government Securities and Chase Manhattan, its chief trading agent, staggered the financial community with disclosure that Drysdale, with debts of $250 million after four months of operation, had failed to pay nearly $200 million in interest due the brokerage firms whose securities Drysdale borrowed and then traded. The default threatened solvency of several of the 30 securities firms involved, Wall Street officials said last week.” [10] Per the Adopting Release: “A Federal Reserve staff analysis concluded that PTFs were particularly active in the interdealer segment of the U.S. Treasury market in 2019, accounting for 61% of the volume on automated interdealer broker platforms and 48% of the interdealer broker volume overall.” See FEDS Notes, “Principal Trading Firm Activity in Treasury Cash Markets,” James Collin Harkrader and Michael Puglia (Aug. 4, 2020) (“[Principal trading firms] dominate activity on the electronic [interdealer broker] platforms (61%).”). See also FEDS Notes, “Unlocking the Treasury Market Through TRACE,” (Sept. 28, 2018). [11] See Securities and Exchange Commission, “SEC Adopts Rules to Include Certain Significant Market Participants as “Dealers” or “Government Securities Dealers” (Feb. 6, 2024), available at https://www.sec.gov/newsroom/press-releases/2024-14. [12] See Securities and Exchange Commission, “Amendments Regarding the Definition of “Exchange” and Alternative Trading Systems (ATSs) That Trade U.S. Treasury and Agency Securities, National Market System (NMS) Stocks, and Other Securities,” (January 2022), available at https://www.sec.gov/files/rules/proposed/2022/34-94062.pdf. [13] See Securities and Exchange Commission, “Regulation of Exchanges and Alternative Trading Systems” (December 1998), available at sec.gov/files/rules/final/34-40760.txt. [14] See “Spotlight on Regulation SCI,” available at https://www.sec.gov/spotlight/regulation-sci.shtml. [15] See Securities Exchange Act Release No. 99487 (February 7, 2024), available at https://www.sec.gov/files/rules/sro/finra/2024/34-99487.pdf. For dissemination, transaction sizes will be capped based on the maturity of the On-the-Run Nominal Coupon at issuance. For example, a $200 million transaction in a 10-year On-the-Run Nominal Coupon will be disseminated with a trade size of “150MM+” rather than the actual dollar amount of the trade. [16] See Securities and Exchange Commission, “SEC Adopts Amendments to Exemption From National Securities Association Membership” (Aug. 23, 2023), available at https://www.sec.gov/news/press-release/2023-154.

Thank you for the introduction. I’m very glad that I’m able to join you for this tenth annual Treasury Market Conference. This conference helps the government identify ways to further improve the functioning and resilience of the Treasury market, which is of course core to the functioning and resilience of the U.S. financial system as a whole. And this makes it a fitting place for me to share my thoughts on the work I and my colleagues across the Biden-Harris Administration have done to navigate financial stresses and strengthen the U.S. financial system over the past three and a half years. In my remarks today, I’ll address why this work is so important, our approach to achieving a healthy and resilient financial system, and what we’ve accomplished. I. The Importance of a Resilient Financial System I’ve focused on financial stability as Treasury Secretary and throughout my career because of a deep conviction concerning the importance of the U.S. financial system to U.S. economic prosperity. I’ve seen through many businesses cycles and financial stresses that a strong, dynamic, and resilient financial system is key to a strong, dynamic, and resilient economy. When the financial system works as it should, it helps American households finance home purchases and save for their children’s educations. It enables businesses to get the capital they need to grow and hire and to invest in new innovations. It allows households and businesses to manage their risks so that they’re prepared for the future. Our strong financial system was crucial to our historic economic recovery, with banks continuing to lend and provide other critical services throughout the COVID-19 pandemic. Now, our financial system is crucial to our medium- and long-term economic agenda, supporting the record growth in new business applications we’ve seen under this Administration and the massive investments in infrastructure, clean energy, and manufacturing that are at the heart of the strategy I’ve called modern supply-side economics. We should also never forget what happens when the financial system does not work as it should. During the Global Financial Crisis, the collapse of large and complex financial institutions and fragile short-term funding markets spread stresses through the financial system and then to the real economy. More than eight million Americans lost their jobs, the unemployment rate rose to 10 percent, and the net worth of American households fell by more than $10 trillion. The recession was the deepest since World War II, lasting six quarters. All of this leaves no question about the need for a resilient financial system. But in January of 2021, I stepped into a Treasury Department whose focus on financial stability had all but disappeared. I knew that this could lead to devastating results for American families, businesses, and financial institutions. So, I worked to restore our government’s focus on financial stability and to craft an approach to build and maintain a financial system that households and businesses can count on day-to-day and that supports economic prosperity in the long-run. II. Our Approach Our approach includes a focus on shoring up strong core foundations of the financial system, including safe and sound financial institutions, financial market utilities and central clearing counterparties, protections for investors and consumers, and financial market integrity. We also, however, recognize the necessity of considering the stability of the system as a whole. We see that connectivity between different financial institutions and markets—from direct linkages to correlated trades—can create outsized effects on the broader financial system and on our economy. This understanding is rooted in recent history. In the aftermath of the Global Financial Crisis, the United States and other countries enacted important financial reforms and pursued new macroprudential policies focused on mitigating systemic risk. At home, there were some who strongly opposed the Dodd-Frank Act, arguing that its regulation would hold back innovation and economic growth. I and many others have insisted on the opposite: Appropriate regulation is critical to supporting a resilient financial system that serves as an engine for innovation and growth. Our view has been borne out. Critics’ warnings, for example, that regulation would undermine the competitiveness of U.S. banks, did not come to pass. Reforms strengthened the financial system, including by equipping banks with substantially more and higher-quality capital that made them better positioned to extend credit to households and businesses that needed it during the pandemic. But we’re well aware that financial intermediation continues to evolve, including in response to reforms. The pandemic also caused profound financial market disruptions like the global dash for cash in March of 2020, revealing additional vulnerabilities including in short-term funding markets. Finally, our approach reflects the importance of collaboration and communication across regulators and other authorities. Responding to financial crises requires swift, coordinated action. Identifying vulnerabilities requires sharing insights. We recognized this need in the aftermath of the Global Financial Crisis as well and established the Financial Stability Oversight Council to inform a more holistic view of and approach to risks. But the Council was severely weakened during the prior Administration. When I took office, the number of Council staff had been cut to single digits. The Council’s analysis team at Treasury, which monitors systemic risks, had been eliminated. The infrastructure supporting interagency engagement and coordination had been significantly scaled back. Put simply, we were without crucial tools to identify and help respond to risks to financial stability. This meant we faced an increased likelihood that risks would materialize into negative impacts on American households and businesses. So, we rebuilt FSOC, scaling up staff and increasing opportunities for agencies to come together to share expertise and insights. FSOC’s new Analytic Framework for Financial Stability Risks is also critical, identifying key vulnerabilities, transmission channels, and authorities to mitigate risks. This positions the Council to take more effective action. And it increases public transparency. III. Key Accomplishments Let me now turn to how we’ve deployed this focus on core foundations, the system as a whole, and collaboration and communication to meet challenges in four key areas. I’ll address how we’ve improved the resilience of the Treasury market; implemented an effective and targeted response so that the regional banking stress in 2023 did not derail our recovery; addressed the diverse risks posed by the evolving nonbank sector; and tackled cross-cutting risks. I’ll also speak to our global work. A. Treasury Market Given where we are, I’ll start with the Treasury market. As this audience knows well, the Treasury market carries out a range of critical functions. Treasury securities are used to finance our government at the lowest cost to the taxpayer and by the Federal Reserve to implement monetary policy. A strong Treasury market helps underpin the role of the dollar in global transactions. Treasuries are a major fixed-income asset for investors around the world and serve as collateral for a wide variety of transactions. They’re also used as a reference benchmark for global asset prices. So, since the start of this Administration, our focus on strong core foundations has led to wide-ranging work with other agencies and the private sector to strengthen the Treasury market so that it remains the deepest, most liquid market in the world. Even as there’s always more to do, we’ve made significant progress and documented it each year, publishing the latest report just last week.  We’ve supported transparency and enabled the government to better assess vulnerabilities by increasing the availability and quality of data on Treasury market activity. For example, just this year, we’ve made more information on Treasury market trading activity available to the public. And we’ll soon begin collecting transaction-level data in the non-centrally cleared bilateral repo market—likely the largest repo market segment in the U.S. and concerningly the one for which the least information has been available. We’re helping bolster market liquidity through a new Treasury buyback program that provides regular opportunities for dealers to sell off-the-run Treasuries back to Treasury.  Buybacks also strengthen Treasury’s cash management—including to reduce borrowing costs over time. We’ve made progress in standardizing risk management through the SEC’s adoption of a new rule to expand central clearing in the Treasury market. And we’ve increased consistent regulatory oversight and enhanced investor protection with a rule clarifying when liquidity providers are required to register as dealers. B. Banks But as I laid out, our approach considers not just strong core foundations, but also the stability of the system as a whole and the need for strong communication and coordination. Our response to the regional banking stress in 2023 showcased how we’re making good on all of these aspects. A year and a half ago now, Silicon Valley Bank and Signature Bank experienced runs that were particularly large and fast by historical standards. These banks had seen rapid deposit growth, especially in uninsured deposits, as well as significant unrealized losses on their securities portfolios. Their runs were followed by deposit outflows from other regional and mid-sized banks that were perceived to have similar weaknesses. We knew we needed to mitigate what was a serious risk of contagion. So, we acted decisively. Regulators moved quickly to close the banks. After receiving recommendations from the Boards of the FDIC and the Fed and consulting with the President, I approved invoking the systemic risk exception during that first weekend. This enabled uninsured depositors at these banks to have access to their funds on Monday morning so that they could pay their employees and suppliers. And that same weekend, with my approval, the Fed established the Bank Term Funding Program to help limit broader contagion. Our efforts were successful, building on the base of a banking system strengthened by the reforms following the Global Financial Crisis. We prevented contagion that could have destabilized the broader financial system and derailed our economic recovery. And we made sure that American taxpayers didn’t bear the costs. We’re well aware, however, that we need to address the core weaknesses these banking stresses revealed, and we urge moving forward on key next steps. We need greater supervisory attention on banks with less stable deposits, and we need regulations that account for unrealized losses on securities. We also need changes so that banks are better prepared for liquidity stress, such as making sure that they have diverse sources of contingency funding and especially that they have the capacity to borrow at the discount window and periodically test this capacity. This includes considering establishing collateral pre-positioning requirements to facilitate borrowing from the discount window, improving the discount window’s operational capacity, and enhancing coordination between the discount window and the Federal Home Loan Banks. And we also need to support regulators’ efforts to strengthen long-term debt requirements for regional banks so that they can be more effectively resolved if they do fail. C. Nonbanks Our understanding of the need for a holistic approach has also driven work on nonbanks, which have become an increasingly important part of the U.S. financial system over the past few decades. Credit provided by U.S. nonbank intermediaries has been growing more quickly than bank credit and now exceeds on-balance sheet bank credit. This makes nonbanks an essential source of financing, with different segments of the sector supporting diverse activities, from trading to retail. And this also means we need to focus on their vulnerabilities. Making sure FSOC has the tools it needs has been at the heart of our work. Last November, the Council took a key step forward by issuing updated guidance that establishes a transparent and durable process for how the Council uses its authority to designate a nonbank financial company for Fed supervision and prudential standards. This strengthens the Council’s ability to promote a resilient financial system.  But designation remains only one of FSOC’s statutory authorities, and the nonbank sector is heterogeneous and diverse, so we’ve also pursued much broader work. We’ve made progress addressing investment funds with features that create financial vulnerabilities, such as through the SEC increasing liquidity requirements for money market mutual funds to reduce run risk. FSOC member agencies continue working to support better data collection and monitoring to identify risks from highly leveraged hedge funds and the growth in private credit. In other areas, like open-end funds, the SEC and industry should continue to explore potential options to address remaining vulnerabilities. We’ve also focused on the increase in market share of nonbank mortgage servicers, which perform critical functions like collecting payments. FSOC, using its new Analytic Framework, issued a report finding that stress in this sector could harm mortgage borrowers and disrupt economic activity. Its recommendations include encouraging state regulators to strengthen prudential standards and require resolution and recovery planning and calling for congressional action to establish a fund to facilitate continuity of servicing operations in the event of stress while avoiding taxpayer-funded bailouts. We’ve also identified new vulnerabilities related to newer entrants like fintechs and technological changes, including vulnerabilities presented by the significant growth of digital assets and trading platforms. Our work included issuing a report on digital assets and one on stablecoins, both of which assessed risks and called for Congress to legislate to close regulatory gaps while supporting innovation. D. Cross-Cutting Risks And across banks and nonbanks, we have also been focused on what I’ll refer to today as cross-cutting risks, including those related to cybersecurity, artificial intelligence, and climate. To combat cyber risks, we’ve helped lead a multi-year effort in collaboration with the private sector to bolster the safe and effective use of cloud services. We worked with banks to launch a cybersecurity alliance called Project Fortress: a public-private partnership through which we’re joining forces with financial institutions of different sizes to deploy defensive measures like a tool that scans for vulnerabilities and offensive measures like sanctions to hold perpetrators of cyber-related activities accountable. AI could provide an advantage, at least initially, to cyber threat actors, so we’ve responded by providing a playbook for financial institutions on best practices for managing AI-specific cyber risks. More broadly, we also see that AI technologies bring significant potential for efficiency and other benefits but also potential risks. We are working to monitor adoption, identify vulnerabilities, and assess whether existing regulations are sufficient to mitigate them or new ones are needed. We’ve focused on climate-related risks to financial stability as well. The Council’s work to strengthen interagency coordination has been key, given gaps in data and fast-evolving risk-assessment methodologies. The Office of Financial Research launched a cutting-edge platform that provides regulators access to climate and financial data to support more research and analysis. And we’re currently collaborating with state insurance regulators to collect data on the cost and availability of homeowners insurance at the zip-code level to help us better understand the risks to the financial system from increasingly severe and frequent climate-related disasters. E. Global Work Addressing cyber, AI technologies, climate and many other risks also requires applying another aspect of our approach: coordination and collaboration, including across jurisdictions. Risks don’t respect national borders. The largest financial firms operate in many countries, and cross-border investor flows are sizable. This means we need to coordinate and communicate regularly with our counterparts in other countries, and to engage through multilateral groups, like the G7, G20, and Financial Stability Board. We got a powerful reminder of the importance of strong international coordination, and especially the need for a well-functioning international framework for recovery and resolution, just last year with the failure of Credit Suisse. So, we’ve made it a key priority to work closely with other jurisdictions before, during, and after times of financial stress. We’ve strengthened communication with counterparts in other jurisdictions, such as the EU, UK, and India, to understand each other’s policies, clarify our intentions and expectations, and respond to crises. And financial stability has also been a key focus of our efforts to build a healthy economic relationship with China. The Financial Working Group that Treasury launched and co-chairs with the People’s Bank of China is now enabling regular and durable communication. And last month, we exchanged letters with the PBOC that strengthen information sharing and will make it easier to coordinate in times of financial stress. IV. Conclusion I’ll end here today, having I hope given some indication of the breadth and depth of our recent and ongoing efforts. Work to build and maintain a resilient financial system is never over. We’ll never be able to just declare victory. And successes can be hard to fully appreciate because they often entail having avoided counterfactuals. But that does not make them any less significant. We saw less than two decades ago how a financial crisis can turn the lives of millions of Americans upside down. And we saw only a year and a half ago that a government that keeps its eye on the ball can protect American businesses and households from financial contagion and its impacts. I could not believe more strongly that we must keep at it. A resilient financial system is critical to a strong economy. And strengthening it requires insisting on thoughtful regulation, including in the face of challenges from those who advocate to roll back policies and regulations. It has been an honor to contribute to this ever-changing, ever-important project throughout my career and over the past three and half years as Treasury Secretary. I am proud of where we are today, even as we remain committed to the work ahead.

WHAT: Commissioner Caroline D. Pham will participate in a fireside chat as part of the American University Washington College of Law’s “great speaker series.” WHEN: Thursday, September 26, 202412:00 p.m. (EDT) WHERE: Virtual Event

ACER approves amendments to the: single day-ahead coupling (SDAC) products methodology, and methodology for calculating scheduled exchanges resulting from single day-ahead coupling. The amendments have been approved following the respective proposals from the European Nominated Electricity Market Operators (NEMOs) and Transmission System Operators (TSOs). What are the methodologies about? The single day-ahead coupling products methodology lists all products that are eligible for inclusion within the SDAC. The methodology for calculating scheduled exchanges resulting from single day-ahead coupling describes how the scheduled exchanges between bidding zones, scheduling areas, and NEMOs’ trading hubs are calculated in the SDAC. Why amend the methodologies? Both methodologies were amended to enable the implementation of the 15-minute Market Time Unit in the SDAC, remove entry barriers for market participants, and improve market flexibility. What are the next steps? NEMOs and TSOs shall implement the amendments of the respective methodologies by the time the 15-minute MTU becomes operational in the SDAC (required by January 2025). Read more on the amendments to the SDAC product methodology & the methodology for calculating scheduled exchanges resulting from SDAC.

Thank you, and thank you for the opportunity to speak to you today.1 It is great to be here again, particularly because this year marks the 10th annual conference on the Treasury market, a milestone that is worth celebrating. I want to acknowledge the Federal Reserve Bank of New York for its leadership in this area, including the dedication and excellence it has brought to hosting this conference over the past decade, in collaboration with the Inter-Agency Working Group on Treasury Market Surveillance, led by the Treasury Department. The Treasury market is the means by which our government meets its financing needs in service to the American people, and it is also the bedrock of the financial system. Promoting the resilience of the Treasury market and ensuring it can continue to fulfill these roles requires the collaboration of agencies and individuals across the government along with the private sector. As others have pointed out today, we have made important progress since last year's conference. The Securities and Exchange Commission has finalized a rule on central clearing of Treasury transactions, the Treasury Department has instituted a program for buying back less-liquid Treasury securities, and the Office of Financial Research is preparing for its permanent collection of data on non-centrally-cleared bilateral repurchase agreement (repo) transactions, which will support our understanding of this market segment as it evolves. I will share some thoughts with you on how I see the work of the Federal Reserve in supporting Treasury market resilience. Our capital and liquidity regulations, our supervision of the firms over which we have authority, and our liquidity facilities play important roles in supporting market resilience and financial stability. Earlier this month, I gave a speech where I reiterated the crucial role of capital in serving these objectives, and the need to balance resilience and efficiency in designing our rules. In that speech, I also outlined the elements of a capital re-proposal that I believe will have broad consensus at the Federal Reserve Board. The adjustments are in response to a robust public comment process, and some of them are designed to address interactions and market functioning concerns raised by commentators. In terms of rulemaking, today I will focus on some additional aspects of our regulatory framework—namely, enhancements to our liquidity regulations. I will share some perspective on how our liquidity regulations work together and are supportive of market functioning and the smooth implementation of monetary policy. The Intersection of Monetary Policy Tools and Supervision and RegulationWe consider how all of the Fed's tools work together to support our objectives. In previous speeches, I have talked about the role of the discount window and the standing repo facility (SRF) in supporting both monetary policy implementation and financial stability, noting how important it is that eligible institutions be ready to use these facilities.2 Today I want to dig into this topic a bit more, including how these tools support monetary policy implementation through appropriate incorporation into liquidity regulations and supervisory practices. After the banking stress in March 2023, we saw a substantial improvement among banks of all sizes in their level of readiness to tap the discount window both in taking the necessary steps for set-up and in their pledging of collateral. Since that time, over $1 trillion in additional collateral has been pledged to the discount window, and additional banks have established access to the SRF. Both of these facilities are potential venues for monetizing assets and raising liquidity to address volatility in private funding market rates or gaps in the availability of private-market funding. We had been hearing that some were confused about how banks could incorporate ready access to the discount window and the SRF into their contingency funding plans and internal liquidity stress tests. Supervisors have a role in assessing the viability of large banks' plans to meet stressed outflows in their stress scenarios, and we have been asked whether the discount window, the SRF, and also Federal Home Loan Bank advances can play a role in those scenarios. The answer to this question is "yes." We provided clarity to the public in August on permissible assumptions for how firms can incorporate the discount window and the SRF into their internal liquidity stress-test scenarios. There are a couple of principles that underlie our response in the frequently asked questions we posted on the Board's website.3 One principle is that our tools are readily available to firms. This means that we see it as acceptable and beneficial for firms to incorporate our facilities to meet liquidity needs in both planning and practice. If firms plan to use our facilities, we expect them to demonstrate ex ante that they are fully capable of doing so, including through test transactions. An additional principle underlying our approach is that, while firms should be ready to use a range of funding sources, firms need to hold sufficient highly liquid assets to meet their potential liquidity needs. That is, they need to self-insure against their own liquidity risks. A third principle is that firms should be ready and able to use private channels to turn these assets into cash, in addition to any public channels they may plan to use. I want to dig a bit deeper into the benefits to both individual firms and the financial system when firms incorporate Fed facilities into their stress preparedness planning. Again, a design feature of our liquidity regulations is that large banks must self-insure against major liquidity risks. Our regulations also provide flexibility in terms of the portfolio composition such banks use to do so. This flexibility allows them to adjust their portfolios based on market conditions and firm needs. A key component of this flexibility is that reserves and certain high-quality liquid assets (HQLA), such as Treasury securities, are equivalent in terms of being treated as the highest quality of liquid assets. This feature is important because, while it allows firms to manage their liquidity buffers more flexibly, it also allows for greater flexibility in our monetary policy implementation and it supports market functioning. We have heard over the years, however, that the degree of substitutability among these assets has been limited by concerns about capacity in stress for the market to turn securities into reserves immediately; these concerns are valid. This constraint can be addressed in part by the appropriate incorporation of Federal Reserve facilities into monetization plans in firms' internal liquidity stress tests. When firms understand that they will not be fully constrained by the capacity of private markets or their individual credit lines to monetize HQLA immediately in stress, they can reduce their demand for reserves in favor of Treasury securities, all else being equal, for their stress planning purposes. This dynamic improves the substitutability of holding reserves and holding Treasury securities either outright or through repo transactions. When banks exhibit a high degree of substitutability of demand for these assets, money market functioning improves. Let me explain with an example. If a bank sees holding reserves and investing in Treasury repo as near substitutes in its liquidity portfolio, it should lend into Treasury repo markets when repo rates rise above the interest rate earned on reserves. When banks can nimbly adjust portfolios in response to price incentives, the efficiency of reserves redistribution through the system improves, and market functioning is enhanced. In aggregate, this activity can prevent rates from rising further, all else being equal. The point at which banks, in aggregate, have a relatively immutable demand for reserves, and are unwilling to lend them out, is evident when a small decrease in the supply of reserves results in a sharp increase in the cost to borrow them. Our monetary policy tools are well positioned to help us avoid this outcome. But, of course, greater willingness of banks to reallocate across close substitutes should help avoid the emergence of sudden pressures in money markets by reducing money market frictions. In 2021, the Federal Reserve launched the SRF, which, along with the discount window, should help cap upward pressure in repo markets that could spill over into the federal funds market. Use of these facilities also increases the supply of reserves in the system. The enhanced clarity for firms that Fed facilities are a fully acceptable venue to get same-day liquidity for their HQLA should help reassure firms about holding reserves and their close substitutes, such as Treasury securities, in their liquidity portfolios. Of course, as I stated earlier, for the largest banks, there is a requirement that they hold highly liquid assets to address their own liquidity risks. They must also be ready to use private markets to monetize these assets. It is also critical that banks recognize and manage the interest rate and liquidity risk of their securities portfolios to ensure those securities held for liquidity purposes can be monetized in stress without creating other adverse effects on a firm's safety and soundness. In 2022 and 2023, certain large banks did not effectively manage the risks of rising rates, and suffered significant fair value losses on their securities holdings, including those in held-to-maturity (HTM) portfolios. These losses affected their ability to respond to liquidity stress, as monetizing the assets could result in realizing losses. When the banking stress hit in March 2023, these securities could not be sold to meet stressed outflows because large unrealized losses inhibited their sale without significant capital implications. This is further complicated in the case of HTM securities, which cannot be sold without risking revaluing a firm's entire HTM portfolio. Selling HTM securities to generate liquidity would therefore have had a particularly large effect on these firms' capital levels, likely increasing the stress on these firms. Further, some firms were unable to rely on private channels such as repo markets for monetization because they were not prepared, they were not regular participants in the market, and market participants were unwilling to lend because of counterparty credit concerns. This combination of factors meant that HTM securities that had been identified by banks as available to serve as a liquidity buffer of assets in stress could not effectively serve that function. Improvements to Our Liquidity RegulationsAs I have mentioned in previous speeches, to address the lessons about liquidity learned in the spring of 2023, we are exploring targeted adjustments to our current liquidity framework.4 Many firms have taken steps to improve their liquidity resilience, and the regulatory adjustments we are considering would ensure that large banks maintain better liquidity risk–management practices going forward. Improvements to our liquidity regulations will also complement the other components of our supervisory and regulatory regime by improving banks' ability to respond to funding shocks. Specifically, we are exploring a requirement that larger banks maintain a minimum amount of readily available liquidity with a pool of reserves and pre-positioned collateral at the discount window, based on a fraction of their uninsured deposits. Community banks would not be covered, and we would take a tiered approach to the requirements. The collateral pre-positioned at the window could include both Treasury securities and the full range of assets eligible for pledging at the discount window. It is vital that uninsured depositors have confidence that their funds will be readily available for withdrawal, if needed, and this confidence would be enhanced by a requirement that larger banks have readily available liquidity to meet requests for withdrawal of these deposits. This requirement would be a complement to existing liquidity regulations such as those that require the internal liquidity stress tests (ILST) I described earlier as well as meeting the liquidity coverage ratio (LCR).5 Incorporating the discount window into a readiness requirement would also reemphasize that supervisors and examiners view use of the discount window as appropriate under both normal and stressed market conditions. In addition, as I have discussed previously, we identified significant gaps in interest rate risk management in the March 2023 banking stress, including in portfolios of highly liquid securities. Relatedly, we saw that banks faced constraints in monetizing HTM assets with large unrealized losses in private markets because they were unable to repo these securities or sell these securities without realizing significant losses. To address these gaps, we are considering a partial limit on the extent of reliance on HTM assets in larger banks' liquidity buffers, such as those held under the LCR and ILST requirements. These adjustments would address the known challenges of banks being able to use these assets in stress conditions. Finally, we are reviewing the treatment of a handful of types of deposits in the current liquidity framework. Observed behavior of different deposit types during times of stress suggests the need to recalibrate deposit outflow assumptions in our rules for certain types of depositors. We are also revisiting the scope of application of our current liquidity framework for large banks. These enhancements to our liquidity regulations will help bolster firms' ability to manage liquidity shocks, and they will also be well integrated with our monetary policy tools and framework. Modernizing Our Tools to Meet Current and Future NeedsTurning back to the discount window, I also want to note that the discount window has served its role well in recent years, and that we are also engaging in ongoing work to improve its operations. Given the crucial role of the discount window in providing ready access to liquidity in a wide variety of market conditions, we continuously work to assess and improve its functionality while engaging with current and potential users of the window. Among the steps we have taken recently include that we now have an online portal, Discount Window Direct, that allows firms to request and prepay discount window loans in a more streamlined manner than was previously possible. We also recently published a request for information on discount window operations and daylight credit asking about key components of these functions. Feedback from the public will help us prioritize areas for improvement, so I strongly encourage anyone with an interest in this topic to weigh in during the comment period. Your feedback will help us ensure that the discount window continues to improve in its role of providing ready access to funding under a variety of market conditions. Thank you. 1. The views I express here are my own and not necessarily those of my colleagues on the Board of Governors of the Federal Reserve System or the Federal Open Market Committee.  2. See Michael S. Barr (2023), "The 2023 U.S. Treasury Market Conference," speech delivered at the Federal Reserve Bank of New York, New York, November 16.  3. See "Subparts D and O—Enhanced Prudential Standards" in Board of Governors of the Federal Reserve System (2024), "Frequently Asked Questions about Regulation YY," webpage.  4. See Michael S. Barr (2024), "On Building a Resilient Regulatory Framework," speech delivered at Central Banking in the Post-Pandemic Financial System, 28th Annual Financial Markets Conference, the Federal Reserve Bank of Atlanta, Fernandina Beach, Fla., May 20.  5. The LCR and ILST are two separate, but complementary, liquidity requirements. The LCR is a standardized liquidity measure across banks, meaning the outflow assumptions are the same for each bank. The ILST is a nonstandardized liquidity measure across banks, meaning each bank determines its own outflow assumptions, subject to supervisory input. 

Today, the U.S. Department of the Treasury is undertaking actions as part of a coordinated international effort to disrupt Russian cybercrime services. Treasury’s Financial Crimes Enforcement Network (FinCEN) is issuing an order that identifies PM2BTC—a Russian virtual currency exchanger associated with Russian individual Sergey Sergeevich Ivanov (Ivanov)—as being of “primary money laundering concern” in connection with Russian illicit finance. Concurrently, the Office of Foreign Assets Control (OFAC) is sanctioning Ivanov and Cryptex—a virtual currency exchange registered in St. Vincent and the Grenadines and operating in Russia. The FinCEN and OFAC actions are being issued in conjunction with actions by other U.S. government agencies and international law enforcement partners to hold accountable Ivanov and the associated virtual currency services.  “The United States and our international partners remain resolute in our commitment to prevent cybercrime facilitators like PM2BTC and Cryptex from operating with impunity,” said Acting Under Secretary of the Treasury for Terrorism and Financial Intelligence Bradley T. Smith. “Treasury, in close coordination with our allies and partners, will continue to use all tools and authorities to disrupt the networks that seek to leverage the virtual assets ecosystem to facilitate their illicit activities.” Treasury’s actions aim to protect U.S. national security and the integrity of the U.S. financial system by cutting off illicit financial institutions from the U.S. market. These actions exemplify how Treasury is leveraging international cooperation and all available tools to counter the ransomware threat and target Russian illicit financial activity. The United States has pressed the Russian government to take concrete steps to prevent cyber criminals from freely operating in its jurisdiction. A coordinated, international effort to combat russian illicit finance In coordination with OFAC and FinCEN’s actions, other U.S. government agencies and foreign law enforcement partners are also taking related actions. The U.S. Secret Service’s Cyber Investigative Section, the Netherlands Police, and the Dutch Fiscal Intelligence and Investigation Service (FIOD) have seized web domains and/or infrastructure associated with PM2BTC, UAPS, and Cryptex. The U.S. Department of State has issued a reward offer up to $10 million through its Transnational Organized Crime Rewards Program for information leading to the arrest and/or conviction of Ivanov. Lastly, the U.S. Secret Service and the U.S. Attorney’s Office for the Eastern District of Virginia are unsealing an indictment of Ivanov and another Russian national, Timur Shakhmametov. These actions by U.S. and Dutch agencies were taken in partnership with Operation Endgame, a multinational coordinated cyber operation with European partners, to dismantle financial enablers of transnational organized cybercrime.     PM2BTC: A primary money laundering concern FinCEN’s order identifying the virtual currency exchange PM2BTC, a virtual currency exchanger associated with Ivanov, as being of “primary money laundering concern” in connection with Russian illicit finance is made pursuant to section 9714(a) of the Combating Russian Money Laundering Act (as amended). The order is effective immediately and prohibits certain transmittals of funds involving PM2BTC by any covered financial institution.  As set out in the order, PM2BTC facilitates the laundering of convertible virtual currency (CVC) associated with ransomware and other illicit actors operating in Russia. PM2BTC provides direct CVC-to-ruble exchange services using U.S.-sanctioned financial institutions, otherwise facilitates sanctions evasion, and has failed to maintain a credible and effective anti-money laundering and know your customer (KYC) program. FinCEN found that nearly half of PM2BTC’s exchange activity had links to illicit activity, and correspondingly, that PM2BTC facilitates a substantially greater proportion of transactions with apparent links to money laundering activity in connection with Russian illicit finance as compared to 99 percent of other virtual asset service providers. FinCEN also determined that PM2BTC employs an unusual obfuscation that inhibits attribution of transactions to illicit activity and actors. The same technique has notably been used by several virtual currency exchanges of concern, some of which are sanctioned by OFAC.  The text of FinCEN’s order can be found here.  Cryptex And Ivanov: russian facilitators of cybercrime Cryptex is a virtual currency exchange registered in St. Vincent and the Grenadines under the name “International Payment Service Provider” that provides financial services to cybercriminals and is operating in the financial services sector of the Russian Federation economy. Cryptex advertises its virtual currency services in Russian and has received over $51.2 million in funds derived from ransomware attacks. Cryptex is also associated with over $720 million in transactions to services frequently used by Russia-based ransomware actors and cybercriminals, including fraud shops, mixing services, exchanges lacking KYC programs, and OFAC-designated virtual currency exchange Garantex. OFAC is designating Cryptex pursuant to Executive Order (E.O.) 13694, as amended by E.O. 13757 (“E.O. 13694, as amended”), for being responsible for or complicit in, or for having engaged in, directly or indirectly, a cyber-enabled activity identified pursuant to E.O. 13694, as amended, and pursuant to E.O. 14024 for operating or having operated in the financial services sector of the Russian Federation economy. Sergey Sergeevich Ivanov is an alleged Russian money launderer, who has laundered hundreds of millions of dollars’ worth of virtual currency for ransomware actors, initial access brokers, darknet marketplace vendors, and other criminal actors for approximately the last 20 years. Through various payment processing services, including one that does business under the name “UAPS,” Ivanov has served as the payment processor for various fraud shops, including OFAC-designated Genesis Market, whose website was taken down by law enforcement in 2023. Ivanov is currently associated with Cryptex. OFAC is designating Ivanov pursuant to E.O. 14024 for operating or having operated in the financial services sector of the Russian Federation economy.  OFAC’s designations follow several recent U.S. Treasury actions to combat Russia-based cyber criminals and further illustrates that Russia continues to offer safe harbor to such actors. These include the July 19, 2024 designation of two members of the Russian hacktivist group Cyber Army of Russia Reborn; the May 7, 2024 designation of Dmitry Khoroshev, also known as LockBitSupp, who is a leader of the LockBit ransomware group; and the February 20, 2024 designation of LockBit affiliates Ivan Kondratiev and Artur Sungatov. The individual and entity designated today facilitated transactions worth hundreds of millions of dollars for cybercriminals and cybercrime services, including ransomware actors and OFAC-designated darknet market Genesis Market.  SANCTIONS IMPLICATIONS As a result of today’s action by OFAC, all property and interests in property of the designated persons described above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked. Unless authorized by a general or specific license issued by OFAC, or exempt, OFAC’s regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons.  Financial institutions and other persons that engage in certain transactions or activities with the sanctioned entities and individuals may expose themselves to sanctions or be subject to an enforcement action. The prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any designated person, or the receipt of any contribution or provision of funds, goods, or services from any such person. Foreign financial institutions that conduct or facilitate significant transactions or provide any service involving Russia’s military-industrial base run the risk of being sanctioned by OFAC. For additional guidance, please see the updated OFAC advisory, “Updated Guidance for Foreign Financial Institutions on OFAC Sanctions Authorities Targeting Support to Russia’s Military-Industrial Base,” as well as OFAC Frequently Asked Questions (FAQs) 1146-1157. The power and integrity of OFAC sanctions derive not only from OFAC’s ability to designate and add persons to the SDN List, but also from its willingness to remove persons from the SDN List consistent with the law. The ultimate goal of sanctions is not to punish, but to bring about a positive change in behavior.  For information concerning the process for seeking removal from an OFAC list, including the SDN List, please refer to OFAC’s Frequently Asked Question 897 here.  For detailed information on the process to submit a request for removal from an OFAC sanctions list, please click here. For more information on the individuals and entities that OFAC designated today, click here. For questions on FinCEN’s order, please contact the FinCEN Resource Center at 1-800-767-2825 or electronically at frc@fincen.gov.