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InvestmentsU.S. regulators focus on data, clearing, oversight in Treasury market review By...

U.S. regulators focus on data, clearing, oversight in Treasury market review By Reuters


© Reuters.

By Michelle Price

WASHINGTON (Reuters) – U.S. regulators are assessing potential methods to spice up the resilience of the U.S. Treasury market, together with enhancing market knowledge high quality, rising oversight of buying and selling venues and introducing central clearing, in response to a Treasury Department-led report printed on Monday.

The market for Treasury securities is probably the most liquid in the world, and the worldwide monetary system makes use of them as a benchmark for asset courses.

But as pandemic fears gripped traders in late February and early March 2020, Treasury market liquidity quickly deteriorated to 2008 disaster ranges, prompting the U.S. Federal Reserve to purchase $1.6 trillion of Treasuries to extend stability.

Other disruptions have occurred in “seemingly more benign

environments,” the Treasury mentioned on Monday.

The Inter-Agency Working Group for Treasury Market Surveillance, led by the Treasury and comprising the Fed and market regulators, has been exploring overhauling the market to enhance its resilience in instances of stress.

Monday’s report gives an replace on areas regulators are exploring, flagging 5 workstreams.

These embrace the function of intermediation by large sellers in the market, which have struggled through the years to maintain up with huge Treasury debt issuance. Among the modifications could possibly be tweaking a capital rule which banks say constrains their means to carry and deal in Treasuries.

The regulators are additionally assessing whether or not the timeliness and granularity of market knowledge on positions and transactions must be improved; whether or not some Treasury trades ought to be put by way of central clearing homes, enhancing the chance administration round such offers and whether or not the choice buying and selling platforms on which many Treasuries commerce require elevated regulatory scrutiny.

Additionally, the regulators are analyzing the function of open-ended funds and different traders in {the marketplace}, and whether or not runs on these funds led them to unload Treasuries to fulfill redemptions and margin calls.

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