November 20, 2018 / 7:21 PM / in 5 months

U.S. senators ask Treasury for update on bond trading

Nov 20 (Reuters) - Several U.S. senators on Tuesday requested the U.S. Treasury Department for an updated review on trade disclosures in the Treasury securities market as regulators devise a plan to avoid another 2014 “flash rally” when prices swung wildly over 12 minutes.

The Treasury and Federal Reserve have been reviewing measures to control extreme swings in the $15.3 trillion market, which on Oct. 15, 2014 suddenly plunged and soared over a 37 basis-point range for no fundamental reason over the short period.

One proposal would require the disclosure of information on trades in the cash Treasuries market so regulators can determine any illicit activities.

“Given the benefits of greater transparency, we request an update on the status of this review and on the timeline for releasing a plan to increase post-trade transparency in this important market,” Senators Mark Warner, Thom Tillis and Mike Crapo wrote in a letter to Secretary Steven Mnuchin.

Exchanges provide much data on Treasury futures trading. But information on the cash Treasury market and results of bond auctions are far more limited, while brokers and venues provide scant data to the public.

Beginning in July 2017, the Financial Industry Regulatory Authority required its members to report their Treasuries trades. The Fed has been collecting this data.

Regulators have not determined how much of this data will be share publicly.

Traders and investors have argued that full disclosure of cash Treasuries trades could hurt market liquidity.

“As is done in other markets, post-trade public transparency for Treasuries could be carefully calibrated to maximize the benefits and minimize the costs with time delays, size limits and phase-ins to mitigate market-making and hedging concerns regarding block trades and less liquid securities,” the senators wrote. (Reporting by Richard Leong; Editing by Richard Chang)

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