US regulators are set to improve insight into the $13tn Treasury market, mulling over a clutch of public comments on a proposed trade reporting rule.

Senior policymakers have homed in on a lack of transparency in the world’s largest government bond market after investigations into wild price swings on 15 October 2014 were limited by the lack of available data.

The proposed rules call for all trades to be reported at the end of the day, leveraging the existing Trace reporting system used for corporate bonds. It is widely viewed to be a first step before decisions are made over how much of the data collected should be made available to the public.

The comments are broadly supportive of regulators having greater insight into the market but there is disparity in the details among different participants. 

Asset managers are worried about some trades going unreported.  

The Investment Company Institute, which represents mutual and exchange traded funds, said that because the rules only require members of the Financial Industry Regulatory Authority to report trades, some non-Finra members will still avoid reporting. The requirement is directed at some of the newer, high-frequency trading firms that have become more important in the Treasury market in recent years. Many of these firms, such as GTS, Citadel and Virtu, are Finra members, but some, such as Rigel Cove and Spirex, are not, said the ICI.

“We do not understand why a trade reporting requirement directed only at Finra members has been put forth at this time,” said Marc Bryant, deputy general counsel at Fidelity Management Research Company.

But HFTs point out that because much of the volume among non-Finra members is on electronic platforms that are Finra members, few trades will in reality slip through the net. It is a point also made by Finra in their proposal. 

Banks are broadly happy with the proposal

Some banking industry groups raise similar issues to the ICI. But on some important points the regulators have conceded to concerns raised by banks earlier in the process.

Banks have argued that public dissemination of Treasury trade data would have an impact on the ease of buying and selling bonds. If trades are reported soon after execution the market could move against the bank once the trade is disclosed, pushing people toward trading in smaller size, they say. 

Indicating that regulators are sympathetic to this point, the Finra proposal does not include requirements for public dissemination of data, only that trades be reported at the end of the day. 

“It’s certainly dealer-friendly,” said Adrian Averre, head of G10 rates at BNP Paribas. “I think Finra have listened to the dealers’ concerns about the potential disruption to liquidity and additional costs that could be passed on to the client base. The proposals are very much in line with what the dealer side would have like to have seen.”

HFTs want Finra to go further

Although it is widely viewed as only a first step, HFTs are already calling on Finra to begin making moves to disseminate the data publicly. They want more immediate reporting of trades, and are concerned that the cost involved in complying with end of day reporting will be wasted if regulators later decide to bring the rules in line with the 15-minute reporting requirement in effect for corporate bonds. 

“The key to making meaningful improvements to Treasury market structure is not only making data available to regulators but also enhancing transparency for all Treasury market participants,” said John McCarthy, general counsel at KCG. 

What the public thinks

Jane Carson, 80, an individual investor, was the first to submit a comment on the proposal, commending efforts to improve transparency despite being dumbfounded that it has not happened sooner.

“It is startling to read that one of our largest markets in the US, the US Treasury market, lacks the basic transparency that our other markets have enjoyed for many decades,” she said.

“It is beyond embarrassing that an entire piece of legislation called Dodd Frank was enacted to provide trade reporting for arcane instruments called ‘swaps’ and failed to include our government’s own securities.”



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