Fed-Backed Group to Tackle Treasury-Market Information Sharing

  • Sixteen-member committee includes Goldman Sachs, Citadel, ICAP
  • Group to also develop guidlines on use of market benchmarks

A Treasury-market advisory committee backed by the Federal Reserve Bank of New York decided last month to develop industry guidelines for information handling and sharing, according to meeting minutes released Tuesday.

The Treasury Market Practices Group -- whose members include executives from Goldman Sachs Group Inc., State Street Corp., ICAP Plc and Citadel LLC -- listed the guidelines as one of three current priorities, according to the minutes. The TMPG also plans to develop guidelines on the use of market benchmarks and work with groups seeking to identify alternatives to ICAP’s fed funds open.

The potential for information-sharing in the $13.2 trillion market has been getting more attention, as more than a dozen lawsuits allege traders at global banks colluded to tilt Treasury auctions in their favor.

The top dealers in the Treasury market see a bigger share of their clients’ trades than they used to. About 60 percent of the $281 billion of trades investors send to dealers each day go through the top five banks, up from 44 percent a decade ago, according to a report from financial-services consulting firm Greenwich Associates.

The lawsuits, with plaintiffs including State-Boston Retirement System, claim traders at global banks shared information to artificially inflate the price of when-issued securities -- generally sold to investors to guarantee their ability to get their hands on a bond, bill or note once it’s issued -- and then bought the debt at auctions for an artificially suppressed price. The TMPG’s efforts also come four months after the U.S. Justice Department’s fraud section asked about trading in that market as part of a broader request for documents sent to most or all of the 22 primary dealers that trade with the Fed.

The New York Fed announced the formation of the TMPG in 2007. It’s tasked with setting best practices for institutions trading and investing in the Treasury market.

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