Industry Agrees Treasury Market Needs Better Oversight

 

Recurring Theme:  Market Transparency

 

Summary Analysis: 

Earlier this year, on January 22, 2016, the Treasury Department published a Request for Information (RFI) on the $13 trillion Treasury bond market, including structural changes, trading and risk management practices, market data and public disclosure.  Recent ‘flash’ crashes and rallies, alleged manipulation in the Treasury bond market and the increase in high frequency trading motivated the inquiry.  Over 50 responses were received.

Commentators, including industry groups such as the American Bankers Association (ABA) and Securities Industry and Financial Markets Association (SIFMA), generally agreed that more coordinated oversight of the Treasury market is needed in order to ensure liquidity. The Federal Reserve Bank of Chicago also submitted a response, saying, “The Treasury market has historically been a lightly regulated marketplace… it is still unclear what authority primarily regulates the U.S. cash Treasury market and has the right to bring enforcement cases.”  The bank recommended further “efforts to harmonize the processes observed in the U.S. Treasury markets around trading, clearing and reporting requirements and conduct a comprehensive analysis of U.S. Treasury markets, including the complex regulatory structures found in these markets.”

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