SIFMA Announces Release of New Paper Examining Functioning of the U.S. Treasury Market

Release Date: April 22, 2016
Contact: Liz Pierce, 212-313-1173, [email protected]

SIFMA Announces Release of New Paper Examining Functioning of the U.S. Treasury Market

Washington, D.C., April 22, 2016–SIFMA today announced the release of a new paper prepared by Promontory Financial Group that examines the U.S. Treasury market, including emerging issues following the October 2014 “flash rally” and subsequent regulatory initiatives.  The paper describes the role the U.S. Treasury market plays in our financial markets, monetary policy and prudential standards by examining the different uses of Treasury securities. SIFMA commissioned Promontory to prepare the paper following the U.S. Department of Treasury’s January 2016 Request for Information (RFI) on the state of Treasury market structure. SIFMA has filed two comment letters on the RFI.

The paper is available on Promontory’s  website.

“The efficient functioning of the U.S. Treasury market is of paramount importance to a variety of stakeholders in the U.S. and across the globe,” said Kenneth E. Bentsen, Jr., SIFMA president and CEO. “Promontory’s analysis provides regulators and market participants with an overview of the current state, structure and functioning of the Treasury marketplace. This baseline understanding is essential as regulators and others consider changes to enhance the resiliency of the market.”

Promontory’s paper focuses on two broad themes:

The extensive and wide-ranging roles of the U.S. Treasury market
The paper highlights that the Treasury market is the largest and most heavily traded of the world’s securities markets, describing it as unique in scale, liquidity and interconnectedness with the global financial system. Treasury securities play foundational roles in the execution of U.S. monetary and fiscal policy and serve the investment and risk management needs of a heterogeneous complex of private sector stakeholders. The financial services industry and regulatory authorities have a common interest in the sustainability of market liquidity, price transparency and quality of execution that have historically been the hallmarks of the Treasury market.

Recent developments have brought both benefits and challenges to Treasury market functioning, including the unprecedented level of Treasuries issuance, the growth of electronic trading, including algorithmic trading, the entrance of new types of market participants and the evolution of trading platforms.

The market characteristics needed to support participants’ needs
The paper identifies liquidity, transparency, operational reliability and resilience and a supportive regulatory framework as essential characteristics of market quality. The paper reviews the current state of each of these market characteristics. Further, the paper offers considerations in respect to proposals that have been made to enhance these characteristics.

The full report is available here: