Inter-Agency Working Group Releases New Report on Treasury Market Resilience Efforts

The U.S. Department of the Treasury (USDT) has published on behalf of the Inter-Agency Working Group on Treasury Market Surveillance (IAWG) a Report on recent efforts to enhance U.S. Treasury market resilience. The key objective of the Working Group – which is comprised of representatives from the USDT, the U.S. Securities and Exchange Commission (SEC), and the U.S. Commodity Futures Trading Commission (CFTC), the Federal Reserve Banks, and the Board of Governors of the Federal Reserve System (FED) – is to ensure a proper functioning of the U.S. Treasury Market. Such functioning includes the provision of sufficient liquidity in the market, the provision of market transparency (price building / transactions), and the provision of a sound infrastructure and integration among various markets.
In its latest report, the Working Group provides an update on the (regulatory) measures it (or any of its members) has taken in the past year to reach this objective. Some of the key measures are noted below:
(1) In August 2023, the SEC adopted final rules to narrow the proprietary trading exemption for U.S. brokers and dealers to only grant such exemption to firms that
– are members of a national securities exchange
– carry no customer accounts; and
– perform certain transactions only.
This measure helps to capture firms that are highly engaged in proprietary trading of Treasury securities under the registration and reporting requirements of FINRA, thus subsequently enhancing transparency over the U.S. Treasury market (please see EventID 22724 in this context for more information).
(2) In the spring of 2022, the SEC launched a consultation on proposed new rules to require those firms that conduct proprietary and principal trading thereby also assuming dealer functions and acting as liquidity providers to the market – particularly as liquidity providers to the U.S. Treasury market – to be registered with the Commission and with FINRA, the self-regulatory organization (SRO) responsible for the oversight of such dealers (please also see EventID #15068 in this context for more information). This action seeks to enhance the resilience of and oversight over market intermediaries in the Treasury market;
(3) In October 2023, the SEC finalized new rules regarding the reporting of security lending transactions to FINRA. Specifically, the rules aim to enhance transparency in the securities lending market by requiring „covered persons“ (entities that facilitate securities loans, lenders, and broker-dealers who borrow securities) to report information about their securities loans to FINRA which in turn will make this information available to the public. This measure is intended to not only enhance transparency, but also improve liquidity in the securities market (please see EventID 23436 in this context for more information);
(4) In February 2023, FINRA updated its reporting on Treasury securities data, shifting from weekly reports to daily and additionally monthly reports. These new reports include more details on trade counts and volume-weighted average prices for specific types of Treasury securities, providing enhanced insight into transaction volume and pricing. Furthermore, in December 2022, FINRA modified some of its rules to improve the quality and timeliness of its Treasury transaction data collection. As of May 15, 2023, members were required to report transactions within 60 minutes of execution. Starting November 6, 2023, members must report the exact execution time, allowing for better matching of trade data (please see EventID 18397 in this context for more information);
(5) In May 2023, the SEC adopted final rules to enhance the reporting requirements of large hedge funds and private equity funds. Specifically, the final rules modify Form PF and Reporting Rule § 275.204(b)-1 to require the reporting of specified trigger events within 72 hours and to require more information to be reported to enhance the information used for risk assessment and the Commission’s regulatory oversight (please see EventID 21097 in this context for more information).
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There are numerous other measures outlined in the document not mentioned above. To view these or further details on the report, please refer to the original document as published by the USDT.