Industry Agrees Treasury Bond Market Needs Better Oversight

According to a Bloomberg article, concerns about the splintering $13.4 trillion Treasury bond market emerged in responses to a recent Treasury Department survey on the market’s structure, and industry participants agree that more coordinated oversight of the market is needed.    

Earlier this year, on January 22, 2016, the Treasury published a Request for Information on the 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. Among the 52 responses the Treasury received, industry participants centered around which activities should get more regulation as the market changes due to technological advancement and balance-sheet pressures.

Some industry groups generally agreed that more coordinated oversight of the Treasury market is needed in order to ensure liquidity. In a letter to the Treasury, the Federal Reserve Bank of Chicago said, “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.”

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