Wall Street faces new Treasury market reporting rule next year

Wall Street faces new Treasury market reporting rule next year
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Banks and brokers will soon be required to submit new information on Treasury market trading.

The Securities and Exchange Commission on Wednesday approved a rule that will give regulators access to data on all Treasury securities except savings bonds. Thousands of firms will be subject to the reporting requirements when the rule goes into effect in July 2017.  

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It is a part of a broader effort by regulators to increase transparency in the Treasury bond market, which is dominated by large institutions such as Morgan Stanley and Goldman Sachs.

The Financial Industry Regulatory Authority, a Wall Street watchdog, proposed the rule this year after the Treasury Department and the SEC asked the agency to consider requiring the banks and brokers it oversees to report Treasury cash market trades to a central database. 

Shining a light on the Treasury market.

The sweeping rule would apply to nearly 4,000 banks and brokers registered with FINRA. The firms will report Treasury transactions to a FINRA database already used for other trades.

“The new requirement will significantly enhance the ability of FINRA and other regulators to understand trading activity in Treasury securities,” FINRA official Steven Joachim said.

He added that using the FINRA database would reduce compliance burdens on firms. No fees will be charged for the reports. The data will only be given to regulators and not the public.

“This marks the first time a regulatory trade reporting regime has been established for a significant segment of the Treasury market, which will enable regulators to better understand market dynamics and exercise their oversight function,” SEC chief Mary Jo White said.

Responding to unexplained volatility.

Regulators have made a concerted effort to study and get more information on the Treasury market following a day of significant and unexplained trading volatility in October 2014.

A joint report from the Treasury Department and four other agencies on the incident was published in June 2015. The report recommended that regulators analyze more trading data.

The FINRA rule going into effect next year will give regulators access to the additional data.

The Federal Reserve Bank of New York is also hosting its second annual Treasury market conference on Monday. Its aim is to gather industry feedback and help regulators better understand the evolving nature of the Treasury market in order to prevent future volatility.

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