Fed's Dudley Outlines Priorities for Tsy Market Reform

--Push for More Transaction Data Transparency in Cash Market

--Need to Understand Asymmetric Clearing Processes

--NY Fed Hosts 3rd Annual Conference on Tsy Market Structure

By Jean Yung

     WASHINGTON (MNI) - Agencies monitoring the enormous U.S. Treasury market

need to continue pushing for increased data transparency to support market

liquidity and integrity, Federal Reserve Bank of New York President Bill Dudley

said Tuesday. 

     The Fed Board is working to collect transaction data from depository

institutions, an initiative that follows the introduction this year of

transaction data reporting by broker-dealers to officials. 

     Transaction data reporting to the public "will ensure that the Treasury

market does not fall behind other markets, will promote a robust and level

playing field, and will help safeguard the liquidity characteristics that make

the Treasury market the benchmark for risk-free trading around the world,"

Dudley said in introductory remarks prepared for the third annual conference

studying the evolving Treasury market hosted by the New York Fed. 

     The gathering involving top officials from the Fed, Securities and Exchange

Commission, Treasury and other agencies as well as top banks and market

executives was prompted by the 2014 "flash crash" in Treasuries that hinted at

large unknown risks in the market. 

     Dudley outlined several other current priorities for regulators. 

     They should try to better understand risk in the clearing and settlement

process in the cash market, as there has been an increasing volume of linked

trades that clear centrally on one side and bilaterally on the other, he said. 

     Such information "asymmetries" in clearance and settlement risk management

could lead to a mispricing of these risks, Dudley said. Regulators also need to

study the "depth, breadth, and durability" of credit arrangements that support

clearance and settlement, he added. 

     Treasury repo markets have also undergone a number of changes since the

financial crisis to make them safer and more centrally cleared, Dudley said. 

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

[TOPICS: M$U$$$,M$$FI$,MGU$$$,MN$FI$]