TBAC Charge # 2

• The extent of publicly available data on transactions in U.S. Treasury markets is substantially less than 

what is available for other major asset classes. For example, cash Treasury securities do not have any 

public transaction or order book reporting.

• Observers have cited several potential benefits associated with greater transparency in the Treasury 

market including 1) improved market efficiency, 2) reduced transaction costs, 3) enhanced fairness, 4) 

improved risk management practices and 5) greater participation by new entrants, who may otherwise be 

reluctant to engage in a market where they have less information than their counterparties.

• Others have suggested that the current level of transparency in the Treasury market is sufficient and note 

that additional trade reporting requirements could adversely affect the willingness of some intermediaries 

to engage in “block” trading of Treasury securities which could impair market liquidity

• We would like the Committee to comment the appropriate level and form of data that should be made 

available to the public, including that related to market prices, trading volumes, market participant 

inventories, and trends in market risk and liquidity.

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Trace in Corp Bond Mkt

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• The Trade Reporting and Compliance Engine (TRACE), introduced in 2002, captures real-time transaction 

data for all eligible public and private (144A) corporate bonds, including investment grade, high-yield and 

convertible debt, agency debt, and asset and mortgage-backed securities. 

• Per FINRA, TRACE procedures and practices increase transparency by fully disseminating transaction 

information related to trades—namely time, price and volume. Brokers and firms are required to report to 

TRACE within 15 minutes of effecting a transaction (for corporate bonds)

• Per FINRA, bond liquidity may become clearer by consulting a bond's trading history—if a bond has not 

traded in days or weeks, it may be illiquid.

• Helps in discovery of the costs associated with buying or selling a bond before actually trading a bond
Trace Stats & History

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Mutual Funds, Closed-End Funds and ETFs 

Corporate Bonds Holdings as a Multiple of 

Daily Trading Volume 2002 through Q3 

2015

Mutual Funds, Closed-End Funds and ETFs 

Corporate Bonds Holdings as a Multiple of 

Those Held by Brokers and Dealers 1985 

through Q3 2015

• Brokers and Dealers Inventory of Corporate bonds has continued to decline.

• Since TRACE was introduced in 2002, we have seen that growth of Mutual Funds, Closed-End Funds and 

ETF holdings continue to outpace the daily trading volumes. 

• Also, after TRACE was introduced for 144A bonds, the HY market participants anecdotally noted that 

liquidity among 144A issues has fallen. 

• Mutual Funds, Closed-End Funds and ETFs Corporate Bonds holdings as a multiple of those held by Brokers 

and Dealers has gone up sharply in the recent years
Equity Market

Equity Market

• All-to-all platform through centralized 

exchanges: e.g. NYSE, NASDAQ

• Price transparency: continuous pre-trade 

information, publicly available best 

quotation etc.

• Comprehensive execution information: 

immediate availability of prices and sizes 

of completed trades

• Smooth risk transfer: less transaction cost, 

better inventory risk sharing 

Treasury Market

• Fragmented platforms: dealer & vendor 

dependent

• Price discovery: more difficult due to lack 

of centralized platform 

• Opaque execution information: details of 

executed trades unavailable to all market 

participants

• Risk transfer: higher transaction cost, 

increasing inventory carry cost

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Treasury Market

• Past developments increasing price transparency were actually through direct access platforms.

• Tradeweb, led by a consortium of dealers, provided the first true visibility into off-the-run pricing where 

levels were executable.

• Bloomberg, though older, was late to offer direct access so the transparency was lacking.

• This was because unlike other markets, risk transfer in Treasuries has been and remains principal-based, 

with dealers expected to be the conduit between end users.

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Why so much daily volume has shifted to Treasury futures and SEFs

Trading activity in Treasuries futures has grown 

relative to cash, similar to the shift towards 

SEFs in swaps:

• Desire to move to a common platform

• All-to-all execution

• Anonymity

• Price transparency

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Annual Avg Daily Trading Volume in Futures vs Hot-run Cash Issues

Source: DTCC
What could Trace or SDR in Treasuries look like

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Similarities to Trace / SDR:

• Block size -> all blocks above “X” amount would be reported as “X+”

• “X” could equal 240mm similar to SDR

• Timing -> All reportable transactions would need to be recorded within 15 minutes

Differences to Trace / SDR:

• Limit on what transactions need to be reported -> minimum threshold for transaction size

• Volumes in treasury market are significantly larger than other markets

• Unless you had an all-to-all platform, operationally reporting all transactions would be tedious and too time 

consuming

• Transactional data on small odd-lot amount may not add to increased transparency and liquidity in the market

• Consider grouping trades by maturity bucket

• By giving trace data on specific off-the-run issues you could diminish liquidity and widen bid/ask -> opposite of 

goal 
ADV of Treasury Products

8 Lit Secondary has been relatively flat, while the Outstanding Debt has grown significantly
Is Public UST Information Sufficient? Lit vs Dark

The market for active UST's is bifurcated between Lit and Dark venues

• Lit Venues (Interdealer ECN's): Broker Tec (BTEC), eSpeed (ESPD), Dealer Web

• BTEC (70+% market share for 2015) sells their market data that includes full depth of book, all order 

levels for a fee of $20,000 per month. Information is delivered via API. 

• ESPD also sells full order depth for substantially less, and maintains ~25% market share (2015 Stats). 

• Dealer Web market share is small.

• Dark Venues (Dealer to Client) - no market data is made available 

• Tradeweb has not allowed NON banks in as market makers.

• Bloomberg (BBERG) only recently has allowed NON Banks. Citadel is active, and Virtu is working to on 

board. Through BPipe on BBERG, and for ~$10,000 per month, post traded volumes can be seen via an 

api.

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Is Public UST Information Sufficient? 

• Based upon market participant assumptions, the D to C Dark space is as large as the interdealer space, yet 

Price, Time, and Volume are basically dark. 

• All pre or post trade data could easily be made available without attribution from D to D and all D to C 

venues.

• Only issue to be resolved would be whether a real time display or an agreed upon delay is 

implemented analogous to TRACE for Corporate. 

• Given that in active USTs, we’re only speaking about 2's 3's 5's 7's 10's and 30's, the data capture and 

publication should be very easy. 

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Is Public UST Information Sufficient? (Cont’d) 

• In Off the Runs ("OTR's") - which includes hundreds of cusips - trade capture and reporting would be much 

more difficult

• Given the illiquid nature of OTR's, a TRACE-like 15 minute delay in reporting Price, Time & Volume 

would have limited market impact.

• An advisable change to public reporting of Active UST data would be a minimum volume threshold in the 

D to C space. 

• For all ECN data, as close to real time reporting could be expected for any volume amounts traded. In the 

D to C space, however, amounts less than $X Million in ALL active issues could require a reporting timeline 

of no more than 5 minutes. In Off the Runs, regardless of amounts traded, a reporting window of no more 

than 15 minutes could be required.

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Additional UST Information that should be made available 

• A consolidated and aggregated UST ACTIVE TAPE, could easily be made available for public consumption, 

yet it would only capture approximately 50% of the total UST market trades.

• This data could easily be aggregated from the existing ECN's, and the reporting delay is all that is really 

left to be determined. 

• A related question: do the following also get called in for reporting and the appropriate delays in 

reporting?

• Dealer to Client Direct

• Electronic RFQ

• Single Bank Portal

• Telephone Market

• Chat Room Trades

• For actives, a sub 5 minute delay would be recommended. Off the Runs, a 15 minute delay would be 

recommended, regardless of execution venue. Again, Price, Time, and Volume inputs would be required. 

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Secondary Market Transparency

• Although equally as large, the D to C component of ACTIVE USTs - especially Block Transactions, and the 

drilling down “at transaction level data" - could be viewed as disruptive to the current “working 

environment" in the Direct Dealer to Client space.

• Large buy side firms are trying to manage large risk positions and hope to minimize market impact.

• In the traditional, principal risk transfer model - deployed in USTs by the dealers - anything more 

than PTV, post trade with a notional +/- $XMillion traded with no longer than 5 minute and 15 

minute reporting requirements will have limited negative impact. In addition, it will hopefully bring 

new players to the market place.

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Secondary Market Transparency (Cont’d)

• Should quotes and or orders be made public?

• LIT ECNs: full order books; e.g. full depth levels of Bids and Offers made available via an api and 

reported at near to real-time for a fee. 

• DARK: Capturing pre-trade market data in a D to C model is impossible, given that none really exists. 

If the long term desire is to move UST active trading to an ALL to ALL Lit Institutional venue, then 

some new entrants are coming to the market, and their success or failure can be easily monitored.

• What characteristics should be reported (e.g. participant type, aggressor side, volume, price)? Should the 

data be in real-time or delayed? 

• Any type of attribution to client type or name is not really necessary. In Client Limit Order Books 

“CLOBs” (BTEC, ESPD) most if not all participants are either FICC netting or PB'd. 

• Again, the greater issue is whether to drill down on the D to C venues and if so then, Price, Time and 

Volume are the only parameters required.

• Should the available data differ depending on the age of other characteristics of a particular security or 

transaction? 

• Regarding Active USTs traded on ECNs, or CLOBs or ATS’s, a real-time reporting of all transactions 

would be recommended. For D to C venue or direct trades where notional amounts traded are less 

than $X mil, a reporting delay of no more than 5 minutes would be recommended. D to C trades 

executed with Notional of > $X million, a reporting delay of no longer than 15 minutes would be 

expected.

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Existing Transparency Model for USTs?

• Given that 50% of Active UST's trade on Lit venues like BTEC (who have >70% market share and publish 

market data at or near real time to those participants willing to pay for full access), reporting on a SIP is 

almost available now. 

• Larger issue is merging the dark D to C Active markets into the existing D to D market data, and creating a 

SIP or TAPE

• It is important to note that the Fed decided to publish complete transaction level details of its Large Scale 

Asset Purchases with a lag. 

• They didn’t want to publish those details in real-time, but thought that the lagged disclosure would 

be beneficial. It would allow customers to keep tabs on the dealers and reduce the information 

asymmetry at the relationship level, if not at the individual-transaction level.

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Takeaways

• The principal-based risk transfer model is disappearing from fixed income markets

• End users are forced to provide liquidity more so than ever before

• Greater transparency would help these end users limit volatility in the market

• Absent an all-to-all platform for risk transfer, these efforts are necessary but not sufficient

• Possible reporting timelines by type of transaction: 

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