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1) June 27 -- The Department of the Treasury (Treasury) is seeking public comment on additional post-trade transparency of data regarding secondary market transactions of Treasury securities, including potential benefits and risks of several examples of potential ways to build on existing public transparency. Comments are due by August 26, 2022.

Treasury, in consultation with other members of the Inter-Agency Working Group on Treasury Market Surveillance (IAWG), is exploring the possibility of additional post-trade transparency of data for secondary market cash transactions of Treasury securities (which we refer to as the “Treasury securities market” in this request for information). Providing additional insight into these transactions may enhance liquidity by fostering a greater understanding of market activity across market segments and supporting the smooth functioning of the Treasury securities market. Additional transparency may also promote greater competition in the Treasury securities market. However, based on the vital roles and unique structure of the Treasury securities market, careful consideration is necessary regarding how much and in what form information should be made available, so that market participants are not disincentivized from providing liquidity and one group of participants is not unduly favored over another. Specifically, consideration is necessary given characteristics of the Treasury market structure that differ from other fixed-income markets, such as differences in market segmentation, overall volumes, individual trades sizes, types of market participants, and methods of execution. Treasury is interested in hearing from the public on the potential benefits and risks of several examples of potential ways to build on existing public transparency.

This request for information regarding additional post-trade transparency for secondary market cash transactions of Treasury securities is part of the ongoing work of the IAWG to strengthen the resilience of the Treasury market across all segments, including cash, futures, and financing. As the deepest and most liquid financial market in the world, the Treasury market serves several key functions, including enabling the financing of the federal government at the least cost, providing a safe and liquid asset to support the flow of capital and credit to households and businesses, and facilitating the implementation of monetary policy. To support these functions and to improve Treasury market resilience, the IAWG's work has been organized into five workstreams: improving resilience of market intermediation; improving data quality and availability; evaluating expanded central clearing; enhancing trading venue transparency and oversight; and assessing effects of fund leverage and liquidity risk management practices.

As outlined in the November 2021 Staff Progress Report (Staff Progress Report), IAWG staffs proposed “transparency that fosters public confidence, fair trading, and a liquid market” as a principle to guide public policy decisions in the Treasury securities market, and created a workstream on improving data quality and availability. The Staff Progress Report described variations in data quality and availability for various Treasury market segments, including cash, funding, and derivatives.

Treasury is seeking public comment on additional post-trade transparency in the Treasury securities market, including potential benefits and risks of several options to build on existing public transparency.

Any additional transparency should take into consideration the differences among security types and trading venues. For example, on-the-run fixed-rate nominal Treasury securities are actively traded, accounting for an average of about 60% of the weekly volume for all Treasury securities, with a significant portion occurring on electronic interdealer platforms. In contrast, other Treasury securities, including off-the-run fixed-rate nominal securities, are more often traded between dealers and customers, in larger individual trade sizes, and are more likely to use voice-based methods or electronic request-for-quote. In addition, further differences exist between fixed-rate nominal coupons, bills, floating rate notes (FRN), Treasury inflation-protected securities (TIPS), and STRIPS (Separate Trading of Registered Interest and Principal of Securities).

Other considerations for the design of additional transparency include the timing of reporting of transactions to TRACE and the potential for subsequent revisions to reports. Under current FINRA rules, FINRA members must generally report transactions by the end of the day. As stated above, FINRA's recent proposal would reduce this timeframe to 60 minutes. In some instances, transactions may be reported late or revised after the reporting timeframe. The current weekly aggregate statistics are released with a lag of two business days to incorporate most of these late or revised transactions. However, after the weekly aggregate statistics are published, they are not amended to incorporate additional late transactions or revisions. If transaction data were released with a shorter delay, additional consideration would need to be given to the potential effects or treatment of late or revised transactions.

Another consideration when evaluating the benefits and risks of additional transparency is measuring liquidity. One common definition of liquidity in the Treasury securities market is the ability to both transact continuously and trade in large quantities at minimal cost. Measuring liquidity generally relies on observing a collection of price and quantity metrics, such as the quoted spread between bid and offer prices, the depth of resting orders in a central-limit order book, the replenishment rate of central-limit book orders, or the price impact in response to large net flows. Treasury is also interested in additional perspectives on how best to measure liquidity in the Treasury securities market and how liquidity is likely to change with additional transparency of transactions.

More generally, Treasury seeks feedback on security characteristics, market structure features, and other factors when considering additional transparency, as well as specific recommendations to help ensure the public release of information appropriately balances the benefits and risks.

Responses to the following topics will help inform Treasury's policy perspectives on additional post-trade data transparency regarding the Treasury securities market. Historically, Treasury has taken a gradual approach to additional public transparency based on feedback from a range of Treasury market participants, including both intermediaries and end-user investors. Some market participants have expressed concerns regarding the effect of additional transparency on the potential willingness and ability of intermediaries to engage in large institutional risk transfer in the Treasury securities market, in particular for off-the-run Treasury securities. This could in turn adversely affect market liquidity including, but not limited to, bid-ask spread and depth of market and ultimately Treasury's debt issuance costs.

In contrast, other market participants have cited the benefits of additional transparency, including post-trade data for use in transaction cost analysis and for greater visibility into intermediation patterns, which could help inform investor decisions around capital allocation to various segments of the Treasury securities market.

Please include in your comments: (1) any data or reasons related to your views, including examples; (2) any alternative approaches and options that should be considered; and (3) any specific recommendations regarding the appropriate form for publicly released transaction information. Where appropriate, please distinguish between the different Treasury security types (i.e., fixed-rate nominal coupons, bills, TIPS, FRNs, and STRIPS), characteristics (e.g., on-the-run, off-the-run, etc.), and market segments (e.g., interdealer, dealer-to-customer, etc.). We also welcome comments on any aspect of additional post-trade transparency not addressed in this request for information.

RFI: https://www.federalregister.gov/d/2022-13540

2) June 23 -- Treasury Launches New Effort to Improve Resilience of its Market (news release)

The U.S. Department of the Treasury, in consultation with the Inter-Agency Working Group on Treasury Market Surveillance (IAWG), has taken the next step in its work to bolster Treasury market resilience by publishing a request for information (RFI) to solicit public feedback on additional post-trade data transparency in the Treasury securities market.

“Soliciting public comment on ways to increase transparency in the Treasury market is part of an effort to help ensure that the Treasury market continues to be the deepest and most liquid market in the world,” Under Secretary of the Treasury Nellie Liang said. “The Treasury market has grown significantly relative to the balance sheets of traditional intermediaries, and technology, trading, and investment practices have evolved substantially in recent years. Our efforts to strengthen the resilience of the Treasury market will help ensure that it continues to serve its central role in the global financial system.”

News release: https://home.treasury.gov/news/press-releases/jy0831

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