U.S. Treasury Officials to Set Meetings With Trading Firms

  • Agenda is how to show public Treasury prices for first time
  • Follows Treasury official meeting with 23 primary dealers
Steven Mnuchin. Photographer: Andrew Harrer/Bloomberg

The U.S. Treasury Department plans to meet with market-makers and other electronic trading firms to discuss ways to bring more transparency to the $14.5 trillion market for government debt.

U.S. officials are seeking industry feedback on how to publicly report prices for Treasury bonds for the first time, according to a person familiar with the matter. Meetings will be held with New York-based firms this week and Chicago traders next week, said the person, who asked not be identified because the information is private. This follows conversations with the 23 primary banks and brokers that buy and sell U.S. debt directly from the government, said a different person familiar with the matter.

Investors, trading firms, banks and government officials have been working for more than three years to shed light on how the market for U.S. government bonds works, spurred by a shocking spike in prices in October 2014 that sent yields plunging by almost five standard deviations, an event expected to occur about once every 5,000 years. Regulation for Treasuries is still fragmented and hasn’t kept up with recent technological advances used by most market participants.

The Treasury is having thoughtful discussions with a wide range of market participants to gather viewpoints and feedback, a department spokeswoman said in an emailed statement. The Treasury is evaluating comments and will ensure that dissemination of the data doesn’t harm the market, according to the statement.

The planned meetings were previously reported by the Financial Times.

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Treasury officials have been investigating the structure of the secondary market for American sovereign debt since late 2014, including ways to make more information accessible to investors. In July, the Financial Industry Regulatory Authority began collecting market data from all participants through its Trace price reporting system.

The current environment gives Wall Street dealers total knowledge of prices and trades while investors and market makers are in the dark about deals between banks and their customers, which comprise half of all trading.

It also hinders the ability of enforcement agencies to craft coherent policies because they don’t fully understand how Treasuries trade. It took months for U.S. regulators to coordinate and collect data after the 2014 “flash rally” in Treasuries that had no apparent trigger. In a span of 12 minutes, benchmark 10-year yields slid 16 basis points then rebounded, prompting the first government review of the market since 1998.

The Treasury Department, headed by Secretary Steven Mnuchin, announced a new round of discussions among industry players in November. Some observers have expressed skepticism that any new rules will be implemented.

Mnuchin “vowed only to ‘study’ the wider dissemination of trade data, with the first principle of any reform to ‘do no harm,’” said Jim Greco, a co-founder of Direct Match Holdings Inc., a Treasury-trading firm that’s failed to break the banks’ stronghold on the market. “I interpreted that as code for the new administration being much more friendly to banks, who universally oppose greater dissemination of trade data.”

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