Published

MFA Submits Comment Letter to Treasury on Market Structure

On April 22, 2016, MFA submitted a comment letter with the U.S. Department of Treasury examining the evolution of Treasury markets and ways to improve liquidity and transparency.

MFA’s letter to the Treasury Department discusses and offers suggestions in the following areas:

  • Improving Treasury Market Liquidity: Many markets, including the Treasury futures markets, have been trading electronically for several decades without impacting liquidity. MFA believes a combination of factors has played a role, including increased adoption of electronic trading technology, and post-crisis regulatory reforms, in spurring changes in market making and liquidity. To enhance liquidity, Treasury should encourage greater market participation from a broader swath of market participants by requiring non-discriminatory access to Treasury trading venues.
  • Continued Monitoring of Trading and Risk Management Practices: MFA’s letter supports greater oversight of trading platforms through registration and public disclosures. However, since the events of October 15, 2014, do not appear to have been triggered by electronic or algorithmic trading, more information is needed before imposing halts or circuit breakers on Treasury markets.
  • Official and Public Data on Treasury Cash Markets: the Treasury Department should coordinate with the Securities and Exchange Commission and Commodity Futures Trading Commission to collect data from Treasury cash market trading platforms and dealers. This would help decrease complexity and ensure quality data for regulators by avoiding inconsistent, redundant or duplicative reporting. As for public data, MFA supports real-time public reporting of cash Treasury transactions with a capped notional threshold for block trades and exceptions for off-the-run or less liquid securities.  Greater market transparency to the public is also likely to encourage greater market participation.

MFA’s full letter to the Department of Treasury is available here.