Treasury Presentation to TBAC
Office of Debt Management

Fiscal Year 2013 Q4 Report
Table of Contents

2

I. Fiscal

A. Quarterly Tax Receipts p. 4

B. Monthly Receipt Levels p. 5

C. Eleven Largest Outlays p. 6

D. Treasury Net Nonmarketable Borrowing p. 7

E. Cumulative Budget Deficits p. 8

F. Deficit and Borrowing Estimates p. 9

G. Budget Surplus/Deficit p. 10

II. Financing

A. Sources of Financing p. 12

B. OMB’s Projections of Borrowing from the Public p. 14

C. Interest Rate Assumptions p. 15

D. Net Marketable Borrowing on “Auto Pilot” Versus Deficit Forecasts p. 16

III. Portfolio Metrics

A. Weighted Average Maturity of Marketable Debt Outstanding with Projections p. 20

B. Recent and Projected Maturity Profile p. 21

IV. Demand

A. Summary Statistics p. 27

B. Bid-to-Cover Ratios p. 27

C. Investor Class Auction Awards p. 31

D. Foreign Awards at Auction p. 38

E. Primary Dealer Awards at Auction p. 42
Section I:

Fiscal

3
4

Sept. 2002 year over year % change data point excluded from corporate taxes due to 9-11 impacts on data.

-50%

-25%

0%

25%

50%

75%

Sep-02

Dec-02

Mar-03

Jun-03

Sep-03

Dec-03

Mar-04

Jun-04

Sep-04

Dec-04

Mar-05

Jun-05

Sep-05

Dec-05

Mar-06

Jun-06

Sep-06

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Year over Year % Change

Calendar Year

Quarterly Tax Receipts

Corporate Taxes Non-Withheld Taxes (incl SECA) Withheld Taxes (incl FICA)
Individual Income Taxes include withheld and non-withheld. Social Insurance Taxes include FICA, SECA, RRTA, UTF deposits, FUTA and 5

RUIA. Other includes excise taxes, estate and gift taxes, customs duties and miscellaneous receipts.

 -

 20

 40

 60

 80

 100

 120

Sep-02

Dec-02

Mar-03

Jun-03

Sep-03

Dec-03

Mar-04

Jun-04

Sep-04

Dec-04

Mar-05

Jun-05

Sep-05

Dec-05

Mar-06

Jun-06

Sep-06

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

$ bn

Calendar Year

Monthly Receipt Levels

(12-Month Moving Average)

Individual Income Taxes Corporation Income Taxes Social Insurance Taxes Other
6

0

100

200

300

400

500

600

700

800

900

1,000

HHS

SSA

Defense

Treasury

Agriculture

Labor

VA

Transportation

OPM

Education

Other Defense Civil

$ bn

Eleven Largest Outlays

FY 2012 FY 2013
7

(35)

(30)

(25)

(20)

(15)

(10)

(5)

0

5

10

15

20

25

30

35

Q1-03Q2-03Q3-03Q4-03Q1-04Q2-04Q3-04Q4-04Q1-05Q2-05Q3-05Q4-05Q1-06Q2-06Q3-06Q4-06Q1-07Q2-07Q3-07Q4-07Q1-08Q2-08Q3-08Q4-08Q1-09Q2-09Q3-09Q4-09Q1-10Q2-10Q3-10Q4-10Q1-11Q2-11Q3-11Q4-11Q1-12Q2-12Q3-12Q4-12Q1-13Q2-13Q3-13Q4-13

$ bn

Fiscal Quarter

Treasury Net Nonmarketable Borrowing

Foreign Series State and Local Govt. Series (SLGS) Savings Bonds
8

0

200

400

600

800

1,000

1,200

1,400

October

November

December

January

February

March

April

May

June

July

August

September

$ bn

Cumulative Budget Deficits by Fiscal Year

FY2011 FY2012 FY2013
In $ Billions

Primary 

Dealers1 CBO2

CBO's Estimate

of the

President's Budget3 OMB4

FY 2014 Deficit Estimate 619 560 675 750

FY 2015 Deficit Estimate 502 378 437 626

FY 2016 Deficit Estimate 501 432 413 578

FY 2014 Deficit Range 525-775

FY 2015 Deficit Range 380-650

FY 2016 Deficit Range 374-600

FY 2014 Net Marketable Borrowing Estimate 691 649 754 874

FY 2015 Net Marketable Borrowing Estimate 588 471 530 787

FY 2016 Net Marketable Borrowing Estimate 581 510 497 736

FY 2014 Net Marketable Borrowing Range 500-851

FY 2015 Net Marketable Borrowing Range 350-801

FY 2016 Net Marketable Borrowing Range 400-760

Estimates as of: Oct-13 May-13 May-13 Jul-13

FY 2014-2016 Deficits and Net Marketable Borrowing Estimates 

1

Based on primary dealer feedback on Oct 28, 2013. Estimates above are averages. 

2

Table 1 and 5 from "Updated Budget Projections: Fiscal Years 2013 to 2023"

3

Table 1 and 2 of the "An Analysis of the President's 2014 Budget"

4

Table S-5 and S-11 of the "Fiscal Year 2014 Mid-Session Review Budget of the US Government"

9
-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

(2,500)

(2,000)

(1,500)

(1,000)

(500)

0

500

20012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023

$ bn

Fiscal Year

Budget Surplus/Deficit

Surplus/Deficit in $ bn (L) Surplus/Deficit as a % of GDP (R)

10

 OMB’s Projection

Projections are from Table S-5 and S-6 of the “Fiscal Year 2014 Mid-Session Review Budget of the US Government.” 
Section II:

Financing

11
12

Sources of Financing in Fiscal Year 2013 Q4

*Assumes an end-of-September 2013 cash balance of $88 billion versus a beginning-of-July 2013 cash balance of $135 billion. By keeping the 

cash balance constant, Treasury arrives at the net implied funding amount. 

Financing Estimates released by the Treasury can be found via the following url: http://www.treasury.gov/resource-center/data-chartcenter/quarterly-refunding/Pages/Latest.aspx

Net Bill Issuance (40) Issuance Gross Maturing Net Gross Maturing Net

Net Coupon Issuance 237 Bills 4-Week 530 500 30 2,030 2,035 (5)

Subtotal: Net Marketable Borrowing 197 Bills 13-Week 390 404 (14) 1,647 1,665 (18)

Bills 26-Week 325 378 (53) 1,407 1,461 (54)

Ending Cash Balance 88 Bills 52-Week 72 75 (3) 320 329 (9)

Beginning Cash Balance 135 Bills CMBs 115 115 0 355 355 0

Subtotal: Change in Cash Balance (47) Bill Subtotal 1,432 1,472 (40) 5,759 5,845 (86)

Net Implied Funding for FY 2013 Q4* 244

Issue Gross Maturing Net Gross Maturing Net

COUPON 2-Year 137 144 (7) 452 475 (23)

COUPON 3-Year 95 104 (9) 383 476 (93)

COUPON 5-Year 140 96 44 455 254 201

COUPON 7-Year 116 0 116 377 0 377

COUPON 10-Year 66 34 32 264 89 175

COUPON 30-Year 42 0 42 168 0 168

TIPS COU 5-Year TIPS 16 0 16 48 16 32

TIPS COU 10-Year TIPS 28 25 3 82 25 57

TIPS COU 30-Year TIPS 0 0 0 23 0 23

Coupon Subtotal 640 403 237 2,252 1,335 916

Total 2,072 1,875 197 8,011 7,180 830

Coupon Issuance

July-September 2013 July-September 2013 Fiscal Year to Date

Bill Issuance

July-September 2013 Fiscal Year to Date
13

Sources of Financing in Fiscal Year 2014 Q1

Assuming Constant Issuance Sizes as of 9/30/2013

*Keeping issuance sizes and patterns, as of 9/30/2013, constant for all securities.

**Assumes an end-of-December 2013 cash balance of $140 billion versus a beginning-of-October 2013 cash balance of $88 billion.

Financing Estimates released by the Treasury can be found via the following url: http://www.treasury.gov/resource-center/data-chartcenter/quarterly-refunding/Pages/Latest.aspx

Assuming Constant Issuance Sizes as of 9/30/2013*: Issuance Gross Maturing Net Gross Maturing Net

Net Bill Issuance (39) 4-Week 455 470 (15) 455 470 (15)

Net Coupon Issuance 202 13-Week 390 390 0 390 390 0

Subtotal: Net Marketable Borrowing 163 26-Week 325 340 (15) 325 340 (15)

52-Week 66 75 (9) 66 75 (9)

Treasury Announced Estimate: Net Marketable Borrowing** 266 CMBs 0 0 0 0 0 0

Implied: Increase In FY 2013 Q4 Net Issuances 103 Bill Subtotal 1,236 1,275 (39) 1,236 1,275 (39)

Issue Gross Maturing Net Gross Maturing Net

2-Year 96 109 (13) 96 109 (13)

3-Year 90 98 (8) 90 98 (8)

5-Year 105 83 22 105 83 22

7-Year 87 0 87 87 0 87

10-Year 66 31 35 66 31 35

30-Year 42 0 42 42 0 42

5-Year 5-Year TIPS 16 0 16 16 0 16

10-Year 10-Year TIPS 13 0 13 13 0 13

30-Year 30-Year TIPS 7 0 7 7 0 7

Coupon Subtotal 522 320 202 522 320 202

Total 1,758 1,595 163 1,758 1,595 163

Coupon Issuance

October-December 2013 October-December 2013 Fiscal Year to Date

Bill Issuance

October-December 2013 Fiscal Year to Date
874

787

736

661 634

677

712

690

712

666

60%

65%

70%

75%

80%

(400)

(200)

0

200

400

600

800

1,000

2014201520162017201820192020202120222023

% of GDP

$ bn

Fiscal Year

OMB's Projections of Borrowing from the Public 

Primary Deficit Net Interest Other Debt Held by

Public as a Percent of GDP - RHS

Debt Held by

Public Net of Financial Assets as a Percent of GDP - RHS

14

OMB’s projections of borrowing from the public are from Table S-11 of the “Fiscal Year 2014 Mid-Session Review Budget of the US 

Government.” Data labels represent the change in debt held by the public in $ billions. “Other” represents borrowing from the public to 

provide direct and guaranteed loans, in addition to TARP activity.

$ bn %

Primary Deficit 857 12%

Net Interest 4,946 69%

Other 1,348 19%

Total 7,151

FY 2014 - 2023 Cumulative Total
1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

2014201520162017201820192020202120222023

10-Year Treasury Note Rate, %

Calendar Year

Interest Rate Assumptions:

10-Year Treasury Notes

OMB FY 2014 MSR

May 2013

Implied Forward

Rates as of 9/30/2013

15

OMB’s economic assumption of the 10-year Treasury note rates were developed in late May 2013 and are from the Table 2 of the “Fiscal Year 

2014 Mid-Session Review Budget of the US Government.” The implied 10-Year Treasury note forward rates are the averages for each fiscal year.

10-Year Treasury Rate,

2.61%, as of 09/30/2013
16

Portfolio & SOMA holdings as of 9/30/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 

by the Federal Reserve, assumed to last until June 2014 with SOMA redemptions until September 2020. These assumptions are based on the 

Federal Reserve’s September 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. Assumes issuance sizes for 

Bills, Nominal Coupons and TIPS are unchanged from 9/30/2013 levels. The principal on the TIPS securities were accreted to each projection 

date based on market ZCIS levels. No attempt was made to match future financing needs. OMB’s projections of borrowing from the public 

projections are from Table S-11 of the “Fiscal Year 2014 Mid-Session Review Budget of the US Government.” CBO’s estimate of the borrowing 

from the public are from Table 2 of the “An Analysis of the President's 2014 Budget.” See table at the end of this section for details.

0

100

200

300

400

500

600

700

800

900

1,000

2014201520162017201820192020202120222023

$ bn

Fiscal Year

Projected Net Borrowing Assuming Future Issuance Remains 

Constant

Projected Net Borrowing OMB’s Projections of

Borrowing from the Public

CBO's Estimate of the

President's Budget
17

Portfolio & SOMA holdings as of 9/30/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 by 

the Federal Reserve, assumed to last until June 2014 with SOMA redemptions until September 2020. These assumptions are based on the Federal 

Reserve’s September 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. The principal on the TIPS securities were 

accreted to each projection date based on market ZCIS levels. CBO’s change in debt held by the public is from “An Analysis of the President’s 

2014 Budget,” published in May 2013. Data labels represent difference between Projected Net Borrowing and CBO’s Change in Debt Held by the 

Public. This scenario does not represent any particular course of action that the Treasury is expected to follow. 

Impact of SOMA Actions on Projected Net Borrowing Assuming Future 

Issuance Remains Constant

(23)

188 

181 

13 

150 

(61)

(247)

(374) (398)

(422)

0

100

200

300

400

500

600

700

800

2014201520162017201820192020202120222023

$ bn

Fiscal Year

With Fed Reinvestments

CBO: Change in Debt Held by the Public

(24)

185 

7 

(168) (172)

(410)

(514)

(374) (398)

(422)

0

100

200

300

400

500

600

700

800

2014201520162017201820192020202120222023

$ bn

Fiscal Year

Without Fed Reinvestments

Projected Net Borrowing
Portfolio & SOMA holdings as of 9/30/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 

by the Federal Reserve, assumed to last until June 2014 with SOMA redemptions until September 2020. These assumptions are based on the 

Federal Reserve’s September 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. Assumes issuance sizes for 

Bills, Nominal Coupons and TIPS are unchanged from 9/30/2013 levels. The principal on the TIPS securities were accreted to each projection 

date based on market ZCIS levels. No attempt was made to match future financing needs. OMB’s projections of borrowing from the public 

projections are from Table S-11 of the “Fiscal Year 2014 Mid-Session Review Budget of the US Government.” CBO’s estimate of the borrowing 

from the public are from Table 2 of the “An Analysis of the President's 2014 Budget.”

Historical Net Marketable Borrowing and Projected Net Borrowing 

Assuming Future Issuance Remains Constant, $ Billion

18

End of Fiscal 

Year Bills 2/3/5 7/10/30 TIPS FRN

Historical Net Marketable 

Borrowing/Projected Net 

Borrowing Capacity

OMB’s Projections of 

Borrowing 

from the Public

CBO's Estimate of the 

President's Budget

2009 503 732 514 38 0 1,786 

2010 (204) 869 783 35 0 1,483 

2011 (311) 576 751 88 0 1,104 

2012 139 148 738 90 0 1,115 

2013 (86) 86 720 111 0 830 932 777 

2014 (64) (68) 669 88 105 730 874 754 

2015 0 (151) 639 87 140 715 787 530 

2016 0 (41) 442 67 35 504 736 497 

2017 0 (7) 256 68 0 316 661 484 

2018 0 35 238 62 0 335 634 507 

2019 0 35 104 62 0 201 677 611 

2020 0 0 119 34 0 153 712 667 

2021 0 67 219 7 0 293 690 667 

2022 0 82 221 (6) 0 297 712 695 

2023 0 37 173 (7) 0 202 666 624 
Section III:

Portfolio Metrics

19
40

45

50

55

60

65

70

75

80

85

19801982198419861988199019921994199619982000200220042006200820102012201420162018202020222024

Weighted Average Maturity (Months)

Calendar Year

Weighted Average Maturity of Marketable Debt Outstanding

Historical Adjust Nominal Coupons to Match Financing Needs Historical Average from 1980 to 2010

20

Portfolio & SOMA holdings as of 9/30/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 by 

the Federal Reserve, assumed to last until June 2014 with SOMA redemptions until September 2020. These assumptions are based on the Federal 

Reserve’s September 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. To match OMB’s projected borrowing 

from the public for the next 10 years, nominal coupon securities (2-, 3-, 5-, 7-, 10-, and 30-year) were adjusted by the same percentage. The 

principal on the TIPS securities were accreted to each projection date based on market ZCIS levels. OMB’s projections of borrowing from the 

public projections are from Table S-11 of the “Fiscal Year 2014 Mid-Session Review Budget of the US Government.” This scenario does not 

represent any particular course of action that Treasury is expected to follow. Instead, it is intended to demonstrate the basic trajectory of average 

maturity absent changes to the mix of securities issued by Treasury.

66.7 months on 

9/30/2013

58.1 months 

(Historical Average 

from 1980 to 2010)
21

Portfolio & SOMA holdings as of 9/30/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 by 

the Federal Reserve, assumed to last until June 2014 with SOMA redemptions until September 2020. These assumptions are based on the Federal 

Reserve’s September 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. To match OMB’s projected borrowing 

from the public for the next 10 years, nominal coupon securities (2-, 3-, 5-, 7-, 10-, and 30-year) were adjusted by the same percentage. The 

principal on the TIPS securities were accreted to each projection date based on market ZCIS levels. OMB’s projections of borrowing from the 

public projections are from Table S-11 of the “Fiscal Year 2014 Mid-Session Review Budget of the US Government.” This scenario does not 

represent any particular course of action that Treasury is expected to follow. Instead, it is intended to demonstrate the basic trajectory of average 

maturity absent changes to the mix of securities issued by Treasury. See table on the following page for details.

Portfolio Composition by original issuance type and term can be found in the appendix (slide 45).

0

2

4

6

8

10

12

14

16

18

20

2014201520162017201820192020202120222023

$ tr

End of Fiscal Year

Projected Maturity Profile, $ Trillion

< 1yr [1, 2) [2, 3) [3, 5) [5, 7) [7, 10) >= 10yr
22

Recent and Projected Maturity Profile, $ Billion

Portfolio & SOMA holdings as of 9/30/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 by 

the Federal Reserve, assumed to last until June 2014 with SOMA redemptions until September 2020. These assumptions are based on the Federal 

Reserve’s September 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. To match OMB’s projected borrowing 

from the public for the next 10 years, nominal coupon securities (2-, 3-, 5-, 7-, 10-, and 30-year) were adjusted by the same percentage. The 

principal on the TIPS securities were accreted to each projection date based on market ZCIS levels. OMB’s projections of borrowing from the 

public projections are from Table S-11 of the “Fiscal Year 2014 Mid-Session Review Budget of the US Government.” This scenario does not 

represent any particular course of action that Treasury is expected to follow. Instead, it is intended to demonstrate the basic trajectory of average 

maturity absent changes to the mix of securities issued by Treasury.

Portfolio Composition by original issuance type and term can be found in the appendix (slide 45).

End of Fiscal 

Year < 1yr [1, 2) [2, 3) [3, 5) [5, 7) [7, 10) >= 10yr Total [0, 5)

2007 1,581 663 341 545 267 480 557 4,434 3,130

2008 2,152 711 280 653 310 499 617 5,222 3,796

2009 2,702 774 663 962 529 672 695 6,998 5,101

2010 2,563 1,141 869 1,299 907 856 853 8,488 5,872

2011 2,620 1,272 1,002 1,516 1,136 1,053 1,017 9,616 6,410

2012 2,889 1,395 1,109 1,847 1,214 1,108 1,181 10,742 7,239

2013 2,939 1,523 1,176 2,031 1,425 1,165 1,331 11,590 7,669

2014 2,862 1,552 1,490 2,267 1,460 1,205 1,540 12,375 8,171

2015 2,871 1,845 1,432 2,417 1,578 1,213 1,689 13,044 8,564

2016 3,039 1,817 1,725 2,504 1,540 1,286 1,863 13,774 9,084

2017 3,111 2,067 1,681 2,621 1,592 1,346 2,050 14,468 9,479

2018 3,335 2,122 1,727 2,676 1,665 1,409 2,206 15,139 9,859

2019 3,285 2,209 1,884 2,740 1,820 1,538 2,381 15,858 10,118

2020 3,488 2,348 1,779 2,971 1,882 1,527 2,621 16,616 10,586

2021 3,599 2,234 2,021 3,102 1,902 1,596 2,884 17,338 10,956

2022 3,476 2,490 2,137 3,217 1,979 1,599 3,178 18,078 11,320

2023 3,701 2,625 2,122 3,232 2,049 1,584 3,459 18,772 11,680
23

Portfolio & SOMA holdings as of 9/30/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 by 

the Federal Reserve, assumed to last until June 2014 with SOMA redemptions until September 2020. These assumptions are based on the Federal 

Reserve’s September 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. To match OMB’s projected borrowing 

from the public for the next 10 years, nominal coupon securities (2-, 3-, 5-, 7-, 10-, and 30-year) were adjusted by the same percentage. The 

principal on the TIPS securities were accreted to each projection date based on market ZCIS levels. OMB’s projections of borrowing from the 

public projections are from Table S-11 of the “Fiscal Year 2014 Mid-Session Review Budget of the US Government.” This scenario does not 

represent any particular course of action that Treasury is expected to follow. Instead, it is intended to demonstrate the basic trajectory of average 

maturity absent changes to the mix of securities issued by Treasury. See table on the following page for details.

Portfolio Composition by original issuance type and term can be found in the appendix (slide 45).

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014201520162017201820192020202120222023

End of Fiscal Year

Projected Maturity Profile, Percent

< 1yr [1, 2) [2, 3) [3, 5) [5, 7) [7, 10) >= 10yr
24

Recent and Projected Maturity Profile, Percent

Portfolio & SOMA holdings as of 9/30/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 by 

the Federal Reserve, assumed to last until June 2014 with SOMA redemptions until September 2020. These assumptions are based on the Federal 

Reserve’s September 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. To match OMB’s projected borrowing 

from the public for the next 10 years, nominal coupon securities (2-, 3-, 5-, 7-, 10-, and 30-year) were adjusted by the same percentage. The 

principal on the TIPS securities were accreted to each projection date based on market ZCIS levels. OMB’s projections of borrowing from the 

public projections are from Table S-11 of the “Fiscal Year 2014 Mid-Session Review Budget of the US Government.” This scenario does not 

represent any particular course of action that Treasury is expected to follow. Instead, it is intended to demonstrate the basic trajectory of average 

maturity absent changes to the mix of securities issued by Treasury.

Portfolio Composition by original issuance type and term can be found in the appendix (slide 45).

End of Fiscal 

Year < 1yr [1, 2) [2, 3) [3, 5) [5, 7) [7, 10) >= 10yr [0, 3) [0, 5)

2007 35.7% 15.0% 7.7% 12.3% 6.0% 10.8% 12.6% 58.3% 70.6%

2008 41.2% 13.6% 5.4% 12.5% 5.9% 9.6% 11.8% 60.2% 72.7%

2009 38.6% 11.1% 9.5% 13.7% 7.6% 9.6% 9.9% 59.1% 72.9%

2010 30.2% 13.4% 10.2% 15.3% 10.7% 10.1% 10.0% 53.9% 69.2%

2011 27.2% 13.2% 10.4% 15.8% 11.8% 10.9% 10.6% 50.9% 66.7%

2012 26.9% 13.0% 10.3% 17.2% 11.3% 10.3% 11.0% 50.2% 67.4%

2013 25.4% 13.1% 10.1% 17.5% 12.3% 10.1% 11.5% 48.6% 66.2%

2014 23.1% 12.5% 12.0% 18.3% 11.8% 9.7% 12.4% 47.7% 66.0%

2015 22.0% 14.1% 11.0% 18.5% 12.1% 9.3% 12.9% 47.1% 65.7%

2016 22.1% 13.2% 12.5% 18.2% 11.2% 9.3% 13.5% 47.8% 66.0%

2017 21.5% 14.3% 11.6% 18.1% 11.0% 9.3% 14.2% 47.4% 65.5%

2018 22.0% 14.0% 11.4% 17.7% 11.0% 9.3% 14.6% 47.4% 65.1%

2019 20.7% 13.9% 11.9% 17.3% 11.5% 9.7% 15.0% 46.5% 63.8%

2020 21.0% 14.1% 10.7% 17.9% 11.3% 9.2% 15.8% 45.8% 63.7%

2021 20.8% 12.9% 11.7% 17.9% 11.0% 9.2% 16.6% 45.3% 63.2%

2022 19.2% 13.8% 11.8% 17.8% 10.9% 8.8% 17.6% 44.8% 62.6%

2023 19.7% 14.0% 11.3% 17.2% 10.9% 8.4% 18.4% 45.0% 62.2%
Section IV:

Demand

25
26

*Weighted averages of Competitive Awards.

**Approximated using prices at settlement and includes both Competitive and Non-Competitive Awards. For TIPS’ 10-Year Equivalent, a 

constant auction BEI is used as the inflation assumption.

Summary Statistics for Fiscal Year 2013 Q4 Auctions

Security 

Type Term Stop Out Rate (%)*

Bid-toCover 

Ratio*

Competitive 

Awards ($ bn)

% 

Primary 

Dealer*

% 

Direct*

% 

Indirect*

NonCompetitive 

Awards ($ bn)

SOMA 

Add Ons 

($ bn)

10-Yr 

Equivalent 

($ bn)**

Bill 4-Week 0.028 4.2 524.6 71.4% 7.8% 20.7% 3.3 0.0 4.6

Bill 13-Week 0.036 4.6 379.2 74.9% 8.1% 17.0% 6.3 0.0 11.1

Bill 26-Week 0.063 5.2 311.7 51.8% 8.4% 39.8% 5.3 0.0 18.4

Bill 52-Week 0.123 4.6 71.3 67.8% 11.4% 20.8% 0.5 0.0 8.2

Bill CMBs 0.041 4.5 115.0 84.6% 7.4% 8.1% 0.0 0.0 0.4

Coupon 2-Year 0.375 3.1 136.0 54.6% 17.9% 27.5% 0.6 0.0 31.0

Coupon 3-Year 0.753 3.3 94.6 47.7% 15.6% 36.7% 0.1 0.0 32.0

Coupon 5-Year 1.489 2.5 139.8 42.9% 9.1% 48.0% 0.2 0.0 76.5

Coupon 7-Year 2.059 2.5 115.9 37.4% 18.1% 44.5% 0.1 0.0 85.7

Coupon 10-Year 2.740 2.6 65.8 39.1% 20.1% 40.8% 0.1 0.0 65.9

Coupon 30-Year 3.706 2.2 42.0 42.6% 17.9% 39.4% 0.0 0.0 87.4

TIPS 5-Year (0.127) 2.2 16.0 53.7% 8.1% 38.2% 0.0 0.0 8.5

TIPS 10-Year 0.438 2.4 28.0 39.7% 4.5% 55.9% 0.0 0.0 30.9

Total Bills 0.044 4.6 1,401.8 68.9% 8.2% 22.9% 15.4 0.0 42.7

Total Coupons 1.523 2.8 594.1 44.8% 15.8% 39.4% 1.1 0.0 378.6

Total TIPS 0.232 2.3 43.9 44.8% 5.8% 49.4% 0.1 0.0 39.4
27

0

1

2

3

4

5

6

Sep-03Sep-04Sep-05Sep-06Sep-07Sep-08Sep-09Sep-10Sep-11Sep-12Sep-13

Bid-to-Cover Ratio

Calendar Year

Bid-to-Cover Ratios for Treasury Bills

4-Week (13-week moving average) 13-Week (13-week moving average)

26-Week (13-week moving average) 52-Week (6-month moving average)
28

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Bid-to-Cover Ratio

Calendar Year

Bid-to-Cover Ratios for 2-, 3-, and 5-Year Nominal Securities

(6-Month Moving Average)

2-Year 3-Year 5-Year
29

0

0.5

1

1.5

2

2.5

3

3.5

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Bid-to-Cover Ratio

Calendar Year

Bid-to-Cover Ratios for 7-, 10-, and 30-Year Nominal Securities

(6-Month Moving Average)

7-Year 10-Year 30-Year
30

0

0.5

1

1.5

2

2.5

3

3.5

Sep-00Sep-01Sep-02Sep-03Sep-04Sep-05Sep-06Sep-07Sep-08Sep-09Sep-10Sep-11Sep-12Sep-13

Bid-to-Cover Ratio

Calendar Year

Bid-to-Cover Ratios for TIPS

5-Year 10-Year (6-month moving average) 20-Year 30-Year
31 Excludes SOMA add-ons. The “Other” category includes categories that are each less than 2%, which include Depository Institutions, Individuals, 

Pension and Insurance.

Primary

Dealers

67.2%

Other Dealers

& Brokers

8.1%

Investment

Funds

11.2%

Foreign &

International

10.0%

Other

3.6%

Investor Class Auction Awards: Bills

Fiscal Year 2013-Q4
32

Excludes SOMA add-ons. The “Other” category includes categories that are each less than 2%, which include Depository Institutions, Individuals, 

Pension and Insurance. These results may include seasonal effects.

“Previous 4 Quarters” = Total Awards for the previous 4 quarters divided by Total Auction Awards of the previous 4 quarters

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

Primary

Dealers

Other Dealers

& Brokers

Investment

Funds

Foreign &

International

Other

Change from Previous 4 Quarters

Change in Demand Over the Last Year in Bills, Auction Awards 

by Investor Class

2013-Q3 less Previous 4 Quarters 2013-Q4 less Previous 4 Quarters
33 Excludes SOMA add-ons. The “Other” category includes categories that are each less than 2%, which include Depository Institutions, Individuals, 

Pension and Insurance.

Primary

Dealers

47.9%

Other Dealers

& Brokers

10.6%

Investment

Funds

26.1%

Foreign &

International

13.7%

Other

1.7%

Investor Class Auction Awards:

2-, 3-, and 5-Year Nominal Securities

Fiscal Year 2013-Q4

Primary

Dealers

39.0%

Other 

Dealers

& Brokers

7.1%

Investment

Funds

36.7%

Foreign &

International

16.6%

Other

0.6%

Investor Class Auction Awards:

7-, 10-, and 30-Year Nominal Securities

Fiscal Year 2013-Q4
-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Primary

Dealers

Other Dealers

& Brokers

Investment

Funds

Foreign &

International

Other

Change from Previous 4 Quarters

Change in Demand Over the Last Year in 2-, 3-, 5-Year Nominal 

Securities, Auction Awards by Investor Class

2013-Q3 less Previous 4 Quarters 2013-Q4 less Previous 4 Quarters

34

Excludes SOMA add-ons. The “Other” category includes categories that are each less than 2%, which include Depository Institutions, Individuals, 

Pension and Insurance. These results may include seasonal effects.

“Previous 4 Quarters” = Total Awards for the previous 4 quarters divided by Total Auction Awards of the previous 4 quarters
35

Excludes SOMA add-ons. The “Other” category includes categories that are each less than 2%, which include Depository Institutions, Individuals, 

Pension and Insurance. These results may include seasonal effects.

“Previous 4 Quarters” = Total Awards for the previous 4 quarters divided by Total Auction Awards of the previous 4 quarters

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Primary

Dealers

Other Dealers

& Brokers

Investment

Funds

Foreign &

International

Other

Change from Previous 4 Quarters

Change in Demand Over the Last Year in 7-, 10-, 30-Year 

Nominal Securities, Auction Awards by Investor Class

2013-Q3 less Previous 4 Quarters 2013-Q4 less Previous 4 Quarters
36 Excludes SOMA add-ons. The “Other” category includes categories that are each less than 2%, which include Depository Institutions, Individuals, 

Pension and Insurance.

Primary

Dealers

44.7%

Other Dealers

& Brokers

1.6%

Investment

Funds

35.1%

Foreign &

International

18.0%

Other

0.6%

Investor Class Auction Awards:

TIPS

Fiscal Year 2013-Q4
37

Excludes SOMA add-ons. The “Other” category includes categories that are each less than 2%, which include Depository Institutions, Individuals, 

Pension and Insurance. These results may include seasonal effects.

“Previous 4 Quarters” = Total Awards for the previous 4 quarters divided by Total Auction Awards of the previous 4 quarters

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Primary

Dealers

Other Dealers

& Brokers

Investment

Funds

Foreign &

International

Other

Change from Previous 4 Quarters

Change in Demand Over the Last Year in TIPS, Auction Awards 

by Investor Class

2013-Q3 less Previous 4 Quarters 2013-Q4 less Previous 4 Quarters
38 Foreign includes both private sector and official institutions.

0

20

40

60

80

100

120

140

160

180

200

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Monthly Private Award ($bn)

Total Foreign Awards of Treasuries at Auction, $ Billion

Bills 2/3/5 7/10/30 TIPS
39 Excludes SOMA add-ons. Foreign includes both private sector and official institutions.

0%

5%

10%

15%

20%

25%

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

% Awarded to Foreign Investors

Foreign Awards of Bills at Auction, Percent
40 Excludes SOMA add-ons. Foreign includes both private sector and official institutions.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

% Awarded to Foreign Investors

Foreign Awards of Nominal Coupons at Auction, Percent

2/3/5 7/10/30
41 Excludes SOMA add-ons. Foreign includes both private sector and official institutions.

0%

5%

10%

15%

20%

25%

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

% Awarded to Foreign Investors

Foreign Awards of TIPS at Auction, Percent

5-Year 10-Year 20-Year 30-Year
42

35%

40%

45%

50%

55%

60%

65%

70%

75%

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

% of Total Competitive Amount Awarded

Primary Dealer Awards at Auction, Percent

4/13/26-Week (13-week moving average) 52-Week (6-month moving average)

2/3/5 (6-month moving average) 7/10/30 (6-month moving average)

TIPS (6-month moving average)
Appendix

43
44

Portfolio & SOMA holdings as of 9/30/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 by 

the Federal Reserve, assumed to last until June 2014 with SOMA redemptions until September 2020. These assumptions are based on the Federal 

Reserve’s September 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. To match OMB’s projected borrowing 

from the public for the next 10 years, nominal coupon securities (2-, 3-, 5-, 7-, 10-, and 30-year) were adjusted by the same percentage. The 

principal on the TIPS securities were accreted to each projection date based on market ZCIS levels. OMB’s projections of borrowing from the 

public projections are from Table S-11 of the “Fiscal Year 2014 Mid-Session Review Budget of the US Government.” This scenario does not 

represent any particular course of action that Treasury is expected to follow. Instead, it is intended to demonstrate the basic trajectory of average 

maturity absent changes to the mix of securities issued by Treasury. See table on the following page for details.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014201520162017201820192020202120222023

% of Portfolio

End of Fiscal Year

Projected Portfolio Composition by Issuance Type, 

Percent

Bills 2/3/5 7/10/30 TIPS (principal accreted to projection date) FRN
45

Recent and Projected Portfolio Composition by Issuance Type, Percent

Portfolio & SOMA holdings as of 9/30/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 by 

the Federal Reserve, assumed to last until June 2014 with SOMA redemptions until September 2020. These assumptions are based on the Federal 

Reserve’s September 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. To match OMB’s projected borrowing 

from the public for the next 10 years, nominal coupon securities (2-, 3-, 5-, 7-, 10-, and 30-year) were adjusted by the same percentage. The 

principal on the TIPS securities were accreted to each projection date based on market ZCIS levels. OMB’s projections of borrowing from the 

public projections are from Table S-11 of the “Fiscal Year 2014 Mid-Session Review Budget of the US Government.” This scenario does not 

represent any particular course of action that Treasury is expected to follow. Instead, it is intended to demonstrate the basic trajectory of average 

maturity absent changes to the mix of securities issued by Treasury.

End of Fiscal Year Bills 2-, 3-, 5-Year 

Nominal Coupons

7-, 10-, 30-Year 

Nominal Coupons

Total Nominal 

Coupons

TIPS (principal 

accreted to 

projection date)

FRN

2006 21.3% 40.5% 29.0% 69.5% 9.2% 0.0%

2007 21.6% 38.9% 29.2% 68.1% 10.3% 0.0%

2008 28.5% 34.5% 26.9% 61.4% 10.0% 0.0%

2009 28.5% 36.2% 27.4% 63.6% 7.9% 0.0%

2010 21.1% 40.1% 31.8% 71.9% 7.0% 0.0%

2011 15.4% 41.4% 35.9% 77.3% 7.3% 0.0%

2012 15.0% 38.4% 39.0% 77.4% 7.5% 0.0%

2013 13.2% 35.8% 43.0% 78.7% 8.1% 0.0%

2014 11.7% 33.3% 45.7% 79.1% 8.3% 0.8%

2015 11.0% 30.5% 48.0% 78.5% 8.6% 1.8%

2016 10.4% 29.4% 49.3% 78.7% 8.9% 2.0%

2017 9.9% 29.2% 49.8% 79.0% 9.1% 1.9%

2018 9.5% 29.2% 50.1% 79.3% 9.4% 1.8%

2019 9.1% 29.4% 50.2% 79.6% 9.6% 1.7%

2020 8.7% 29.6% 50.4% 80.0% 9.6% 1.7%

2021 8.3% 29.6% 50.9% 80.5% 9.6% 1.6%

2022 8.0% 29.4% 51.7% 81.1% 9.4% 1.5%

2023 7.7% 29.4% 52.2% 81.6% 9.3% 1.5%
*Weighted averages of Competitive Awards. 46

**Approximated using prices at settlement and includes both Competitive and Non-Competitive Awards.

Issue Settle Date Stop Out 

Rate (%)*

Bid-to-Cover 

Ratio*

Competitive 

Awards ($ bn)

% Primary 

Dealer* % Direct* % Indirect* Non-Competitive Awards ($ bn)

SOMA Add 

Ons ($ bn)

10-Yr Equivalent 

($ bn)**

4-Week 7/5/2013 0.015 4.09 29.78 72.8% 8.5% 18.7% 0.22 0.00 0.25

4-Week 7/11/2013 0.025 4.08 34.76 60.7% 8.7% 30.6% 0.24 0.00 0.30

4-Week 7/18/2013 0.020 4.62 34.71 79.1% 9.9% 11.0% 0.28 0.00 0.30

4-Week 7/25/2013 0.020 4.14 39.73 81.3% 6.9% 11.8% 0.27 0.00 0.35

4-Week 8/1/2013 0.030 3.94 43.96 72.3% 5.7% 22.0% 0.26 0.00 0.39

4-Week 8/8/2013 0.045 3.98 44.76 74.6% 7.0% 18.4% 0.23 0.00 0.39

4-Week 8/15/2013 0.055 4.08 44.69 67.0% 5.5% 27.5% 0.26 0.00 0.39

4-Week 8/22/2013 0.045 4.22 49.74 76.8% 8.6% 14.6% 0.26 0.00 0.44

4-Week 8/29/2013 0.040 3.83 49.04 69.7% 11.3% 19.1% 0.27 0.00 0.44

4-Week 9/5/2013 0.020 4.05 49.74 70.4% 7.4% 22.2% 0.27 0.00 0.44

4-Week 9/12/2013 0.010 4.45 34.76 62.4% 6.7% 30.9% 0.24 0.00 0.31

4-Week 9/19/2013 0.000 4.91 34.71 66.1% 6.8% 27.1% 0.24 0.00 0.31

4-Week 9/26/2013 0.015 4.16 34.22 73.3% 9.2% 17.4% 0.24 0.00 0.31

13-Week 7/5/2013 0.050 4.29 28.72 78.4% 8.3% 13.2% 0.56 0.00 0.83

13-Week 7/11/2013 0.045 4.52 29.39 77.8% 10.4% 11.8% 0.46 0.00 0.84

13-Week 7/18/2013 0.040 4.95 29.38 83.3% 10.2% 6.5% 0.51 0.00 0.84

13-Week 7/25/2013 0.035 4.67 29.52 82.9% 9.6% 7.6% 0.49 0.00 0.84

13-Week 8/1/2013 0.030 4.54 28.67 84.1% 4.5% 11.4% 0.44 0.00 0.85

13-Week 8/8/2013 0.040 4.73 29.33 79.7% 8.5% 11.8% 0.47 0.00 0.85

13-Week 8/15/2013 0.055 4.78 29.42 69.2% 6.1% 24.7% 0.48 0.00 0.85

13-Week 8/22/2013 0.050 4.66 29.39 75.3% 8.3% 16.5% 0.50 0.00 0.86

13-Week 8/29/2013 0.040 4.72 28.54 79.7% 8.8% 11.5% 0.48 0.00 0.87

13-Week 9/5/2013 0.030 4.88 29.35 65.3% 4.8% 29.8% 0.45 0.00 0.86

13-Week 9/12/2013 0.020 4.12 29.54 72.8% 10.2% 17.1% 0.44 0.00 0.86

13-Week 9/19/2013 0.010 4.34 29.42 65.5% 6.7% 27.8% 0.48 0.00 0.86

13-Week 9/26/2013 0.020 4.54 28.50 59.9% 8.6% 31.5% 0.50 0.00 0.86

26-Week 7/5/2013 0.085 4.91 23.88 63.1% 7.4% 29.5% 0.40 0.00 1.39

26-Week 7/11/2013 0.075 5.03 23.87 61.9% 9.4% 28.7% 0.43 0.00 1.40

26-Week 7/18/2013 0.070 5.54 24.11 56.0% 7.6% 36.4% 0.42 0.00 1.40

26-Week 7/25/2013 0.070 5.31 24.04 51.0% 6.9% 42.1% 0.48 0.00 1.40

26-Week 8/1/2013 0.065 5.10 23.75 52.2% 4.4% 43.4% 0.45 0.00 1.41

26-Week 8/8/2013 0.075 5.13 24.06 56.0% 4.9% 39.1% 0.47 0.00 1.41

26-Week 8/15/2013 0.075 5.01 23.87 46.3% 9.1% 44.5% 0.45 0.00 1.42

26-Week 8/22/2013 0.075 5.31 24.04 43.6% 11.4% 45.0% 0.40 0.00 1.43

26-Week 8/29/2013 0.065 5.37 23.87 47.8% 9.7% 42.4% 0.35 0.00 1.43

26-Week 9/5/2013 0.055 5.36 24.16 32.4% 13.1% 54.4% 0.36 0.00 1.43

26-Week 9/12/2013 0.035 6.12 24.16 64.3% 3.0% 32.8% 0.36 0.00 1.44

26-Week 9/19/2013 0.030 4.57 24.27 53.2% 11.7% 35.1% 0.35 0.00 1.44

26-Week 9/26/2013 0.050 4.79 23.61 46.0% 10.2% 43.8% 0.39 0.00 1.44

52-Week 7/25/2013 0.115 4.65 24.77 67.2% 12.5% 20.3% 0.15 0.00 2.81

52-Week 8/22/2013 0.135 4.67 24.76 72.3% 6.6% 21.1% 0.17 0.00 2.85

52-Week 9/19/2013 0.120 4.51 21.75 63.3% 15.8% 20.9% 0.17 0.00 2.53

CMBs 8/15/2013 0.060 4.81 25.00 79.0% 4.1% 17.0% 0.00 0.00 0.16

CMBs 8/29/2013 0.035 5.31 25.00 74.8% 10.6% 14.6% 0.00 0.00 0.11

CMBs 9/5/2013 0.030 4.27 30.00 88.9% 7.5% 3.5% 0.00 0.00 0.10

CMBs 9/12/2013 0.040 3.77 35.00 91.8% 7.3% 0.9% 0.00 0.00 0.06

Bill Issues
47

*Weighted averages of Competitive Awards.

**Approximated using prices at settlement and includes both Competitive and Non-Competitive Awards. For TIPS’ 10-Year Equivalent, a 

constant auction BEI is used as the inflation assumption.

Issue Settle Date Stop Out 

Rate (%)*

Bid-to-Cover 

Ratio*

Competitive 

Awards ($ bn)

% Primary 

Dealer* % Direct* % Indirect* Non-Competitive 

Awards ($ bn)

SOMA Add 

Ons ($ bn)

10-Yr Equivalent 

($ bn)**

2-Year 7/1/2013 0.430 3.05 34.76 56.3% 7.8% 35.8% 0.13 0.00 7.78

2-Year 7/31/2013 0.336 3.08 34.72 53.2% 16.4% 30.4% 0.15 0.00 7.88

2-Year 9/3/2013 0.386 3.21 33.76 54.6% 26.1% 19.3% 0.14 0.00 7.74

2-Year 9/30/2013 0.348 3.09 32.73 54.2% 21.8% 24.0% 0.17 0.00 7.59

3-Year 7/15/2013 0.719 3.35 31.87 51.5% 13.0% 35.6% 0.03 0.00 10.66

3-Year 8/15/2013 0.631 3.21 31.85 44.7% 14.0% 41.4% 0.04 0.00 10.79

3-Year 9/16/2013 0.913 3.29 30.86 46.8% 20.0% 33.1% 0.04 0.00 10.54

5-Year 9/3/2013 1.624 2.38 34.95 46.9% 12.7% 40.3% 0.05 0.00 19.24

5-Year 9/30/2013 1.436 2.67 34.97 43.4% 11.8% 44.9% 0.03 0.00 19.45

5-Year 7/1/2013 1.484 2.45 34.95 43.5% 3.6% 53.0% 0.04 0.00 18.82

5-Year 7/31/2013 1.410 2.46 34.94 37.8% 8.3% 53.9% 0.04 0.00 19.03

7-Year 7/1/2013 1.932 2.61 28.99 37.8% 15.7% 46.4% 0.01 0.00 21.16

7-Year 7/31/2013 2.026 2.54 28.99 34.9% 16.6% 48.6% 0.01 0.00 21.29

7-Year 9/3/2013 2.221 2.43 28.97 36.8% 22.4% 40.8% 0.02 0.00 21.50

7-Year 9/30/2013 2.058 2.46 28.97 40.2% 17.8% 42.0% 0.02 0.00 21.75

10-Year 7/15/2013 2.670 2.57 20.98 45.2% 16.3% 38.6% 0.02 0.00 20.97

10-Year 8/15/2013 2.620 2.45 23.93 38.5% 15.2% 46.3% 0.05 0.00 23.97

10-Year 9/16/2013 2.946 2.86 20.94 33.8% 29.6% 36.6% 0.05 0.00 20.98

30-Year 7/15/2013 3.660 2.26 12.99 43.4% 16.3% 40.2% 0.01 0.00 27.62

30-Year 8/15/2013 3.652 2.11 15.99 42.7% 17.1% 40.2% 0.01 0.00 33.03

30-Year 9/16/2013 3.820 2.40 12.99 41.7% 20.6% 37.7% 0.01 0.00 26.79

Issue Settle Date Stop Out 

Rate (%)*

Bid-to-Cover 

Ratio*

Competitive 

Awards ($ bn)

% Primary 

Dealer* % Direct* % Indirect* Non-Competitive Awards ($ bn)

SOMA Add 

Ons ($ bn)

10-Yr Equivalent 

($ bn)**

5-Year 8/30/2013 (0.127) 2.18 15.98 53.7% 8.1% 38.2% 0.02 0.00 8.46

10-Year 7/31/2013 0.384 2.44 14.97 35.4% 6.9% 57.7% 0.03 0.00 16.53

10-Year 9/30/2013 0.500 2.38 12.98 44.6% 1.6% 53.8% 0.02 0.00 14.39

Nominal Coupon Securities

TIPS
Electronic Trading in the Secondary 

Fixed Income Markets

Over recent years, technological advances have had a significant impact on the way assets are traded in 

fixed income markets. Specifically, with the rise in electronic trading, its associated participants and 

execution strategies have accounted for an increasing percentage of the traded volume in secondary fixed 

income markets.

We would like the Committee to comment on the increase of High Frequency Trading (HFT) and 

Algorithmic Trading (AT) in fixed income markets, and specifically in the Treasury market. To what extent 

has this trading technology permeated fixed income trading? How has it changed market dynamics?

Treasury Borrowing Advisory Committee – Charge #1
49

Agenda

November 5, 2013

 Definitions, Protocols, Methods and Venues

 Overview and Evolution of Electronic Trading in the Fixed Income Markets

 US Treasuries

 Foreign Exchange

 Takeaways and Discussion Topics

 Appendix – Change Management, Access Controls and Security for Automated Trading

 Appendix – Fixed Income Market DtC Volumes
50

Electronic Trading – Definitions

Definition < 1 sec 1 sec–

1 min

1m –

15min

15min 

– 1d

> 1d

Direct Market 

Access (DMA)

Direct access to send / execute orders in a given pool of liquidity 

Smart Order Routing Taking a single order and dividing it up to be routed to multiple pools of liquidity  

Algo Execution Use of an algorithm to enter in a single or multi-legged order over a period of time 

to minimize market impact

  

Definition < 1 sec 1 sec–

1 min

1min –

15min

15min 

– 1d

> 1d

HFT Market Making Market making in highly liquid markets with a short time horizon, typically 

requiring a Central Limit Order Book (CLOB)

 

HFT Alpha Seeking A strategy of price taking based on projections of short term market moves, 

typically requiring a CLOB

 

Liquidity Transfer Providing liquidity in a market where it is in demand by transferring it from another 

related market through spread trading

 

Relative Value Entering into multi-legged trades that seek to profit from value differentials across 

related markets

  

Execution Strategies employ technology to optimally execute an order (or multiple orders). Investment 

decisions such as instruments to trade, total size, target levels, etc. are made independently of the execution 

strategy

Automated Trading Strategies use algorithms to make investment decisions and to electronically execute these 

decisions (via an Execution Strategy)
51

Electronic Trading – Protocols

 Trading protocols (offered by a given electronic venue) determine the type of electronic trading strategies that 

are able to be deployed

 Most trading protocols allow market participants to use automated strategies. However, certain venues either 

do not offer an Application Programming Interface (API) for liquidity takers, or the protocol itself does not 

facilitate automated trading

 Protocols such as RFQ and RFS/RFM automate the communication process between parties to a transaction, 

but do not materially change the nature of execution when compared with traditional voice transactions

 Other protocols (e.g., FX-style streaming) create direct linkages between name-disclosed counterparties that can 

either be traded directly or aggregated by the liquidity takers (via APIs) and have no manual equivalent

 A Central Limit Order Book (CLOB) protocol creates anonymous pools for order matching

Protocol Description Liquidity 

Taker

Market 

Makers

Request For Quote (RFQ) Liquidity taker requests a one-sided price from 

multiple market makers on a name-disclosed basis

Automation

Not Possible

Automation 

Possible

Request For Stream or 

Market (RFS/RFM)

Liquidity taker requests a two-sided market from

multiple market makers on a name-disclosed basis

Automation

Not Possible

Automation

Possible

FX-Style Streaming Market makers provide continuous, executable twosided marketsAutomation 

Possible

Automation 

Required

Central Limit Order Book 

(CLOB)

Anonymous limit orders provided by any market 

participant that are executed through a matching engine

Automation 

Possible

Automation 

Required
52

Electronic Trading – Methods and Venues

Methods / Venues Definition

Dealer to Client Platform (DtC) A venue which connects dealers to their clients on a name-disclosed basis. These platforms 

are known as “Multi-Dealer Platforms” since they connect multiple dealers to multiple 

clients. All parties must be enabled on a bi-lateral basis in order to see quotes and execute

Inter Dealer Broker (IDB) IDBs evolved from venues for Dealer to Dealer (DtD) trading that have since opened up to 

additional active participants, such as proprietary trading firms. Execution is typically 

anonymous and does not require enablement. Trades clear through a central party

Single Dealer Platform (SDP) Proprietary platforms provided by a dealer that allows their clients access quotes and execute 

trades with that dealer. The dealer must enable each client and all activity is on a namedisclosed basis

Direct Market Access (DMA) A liquidity provider, Electronic Communication Network (ECN) or exchange offers a direct 

API to a market participant which streams prices and allows direct execution. Each direct 

connection is from a single source of liquidity, and often the market participant will 

aggregate connections across multiple sources of liquidity

Swap Execution Facility (SEF) A SEF is a platform established under Dodd-Frank for the execution of certain derivatives. 

These platforms will likely share many characteristics of the electronic trading methods and 

venues that currently exist for Rates, FX and Futures

Exchange An organized exchange that is open to all market participants either through DMA or 

through a sponsoring broker (SMA). Execution is always anonymous in an all-to-all manner. 

Electronic exchanges typically have a Central Limit Order Book (CLOB), a matching engine 

which determines when orders are executed, and a central counterparty or clearing firm
53

Conditions for Automated Trading Strategies

 Homogenous

 Liquid

 Commoditized

 Centrally Cleared or settled within a set of established conventions which minimize counterparty credit 

risk (as in the case of FX Prime Brokerage)

 Executable on an electronic venue that

 Allows API connectivity for all participants

 Has a trading protocol which enables all participants to be fully automated and typically 

anonymous

 Protocols such as CLOB and FX Style Streaming enable this

 Protocols such as Request for Quote (RFQ) and Request for Stream or Market (RFS/RFM) 

do not enable this

The following conditions typically need to be met for a given instrument to be included in an Automated 

Trading Strategy
54

Non-Dealer Electronic Trading Market Participants

November 5, 2013

 Traditional Asset Managers, GSEs, Bank Portfolios, Non-Financial Corporations, Pension Funds and 

Mortgage Companies

 Desire price transparency

 Have historically used RFQ, RFS or RFM platforms as proof of “best execution”

 Typically prefer trading on a name-disclosed basis with their counterparties

 Are increasingly leveraging third-party execution algorithms

 Rarely require API access to liquidity pools

 Hedge Funds and Active Trading Accounts

 Often use their own execution algorithms

 Desire sophisticated leg-trading capabilities

 Typically prefer API access to liquidity pools

 Execute on both RFQ and Streaming Venues

 Non-Bank Market-Makers, High- and Medium-Frequency Alpha Seekers

 Strongly prefer anonymity

 Do not use RFQ platforms

 Actively seek API access to liquidity pools

 Typically require Exchanges / Central Limit Order Books

Given the variety of requirements and constraints among the diverse set of non-dealer market participants, 

there is understandably no consensus regarding the optimal choice for electronic trading protocols, 

methods and venues. Additionally, evolution necessarily occurs slowly as many end users are risk averse 

and comfortable with the status quo
55

Agenda

November 5, 2013

 Definitions, Protocols, Methods and Venues

 Overview and Evolution of Electronic Trading in the Fixed Income Markets

 US Treasuries

 Foreign Exchange

 Takeaways and Discussion Topics

 Appendix – Change Management, Access Controls and Security for Automated Trading

 Appendix – Fixed Income Market DtC Volumes
56

Evolution of Electronic Trading in Fixed Income

Year Who What

1992 CME  Launch of the Globex electronic platform

1994 CBOT  Launch of Project A for electronic trading of US Treasury Bond Futures

1998 TradeWeb  Launches first multi-dealer online marketplace of Treasuries

1999 eSpeed  Launches as Cantor-Fitzgerald's electronic Treasury bond trading platform for IDBs

2000 BrokerTec  Launches competing electronic Treasury bond trading platform for IDBs

2000 TradeWeb  Adds US Agencies and European Government Bonds

2001 TradeWeb  Adds Agency MBS TBAs and Commercial Paper

2003 BrokerTec  Acquired by ICAP and together launch the first combined voice and electronic pools

2004 TradeWeb  Adds US Corporate Bonds

2005 TradeWeb  Adds US Interest Rate Swaps, CDS Indices and Repo

2011 TradeWeb  Launches Dealerweb electronic IDB marketplace for Off-the-Run Treasuries

2012 Multiple  Dealers launch client algorithmic execution platforms for US Treasuries

2013 CFTC  Mandatory clearing of swaps begins under Dodd Frank

2013 CFTC  Swap Execution Facilities (SEFs) commence operations

The adoption of electronic trading in the Fixed Income markets has been extremely gradual

Sources: BGC, Cantor Fitzgerald, ICAP, NASDAQ, TradeWeb
57

Fixed Income: Current State of Electronic Trading

CDS

Indices

FX

Spot

US Investment Grade

Corporate Bonds

EUR IRS

Treasury 

Futures

On-The-Run

Treasuries

(IDB)

USD IRS

European 

Govt. Bonds

Treasuries

(D2C)

1. All volume measures estimated from a variety of sources

Electronic D2C as % of D2C Market1

2012 2013 % Change 2015 

Estimate

Average Daily 

Elec Volume

US Treasuries 23% 37% +14% 50% $50b

EGB 31% 37% +6% 50% $9b

USD IRS 12% 15% +3% 75% $8b

EUR IRS 9% 12% +3% 50% $10b

CDS Index 85% 85% 0% 90% $58b

Corporate Cash 10% 13% +3% 15% $5b

FX Spot 75% 75% 0% 80% $800b

Electronic Trading Percentage Uptake by Product

US High Yield

Corporate Bonds
58

Observations of Electronic Trading in Fixed Income

November 5, 2013

 FIC markets have historically traded on a bi-lateral basis, whereas equity markets have historically traded on exchanges

 In the FIC markets, market-makers are compensated implicitly via bid/offer, rather than explicitly via commissions

 FIC markets have historically traded on a principal-to-principal basis, where the market-maker is compensated for 

warehousing the resulting risk

 Bid/offer is generally a function of the volatility of the positions and the time required to distribute the risk

 Equity markets have typically traded on an agency basis (in the case of block trades, the resulting risk can often be 

disseminated into the market relatively quickly)

 During periods of imbalanced flows or market stress, designated specialists were required to step in and warehouse 

the temporary miss-match between supply and demand

 In FIC markets, the most successful market-makers have been the largest banks, which have significant internal flows 

due to their global footprints and their multiple lines of business

 These activities give them an inherent advantage in their ability to provide liquidity to the markets

 Of the FIC markets, the FX Markets are the most highly evolved with respect to electronic trading. As the state of fixedincome electronic trading advances, it should more closely parallel the evolution of the FX markets (rather than the 

equity markets) for reasons outlined above

 Both the Equity and FX markets share the characteristic that the instruments being traded are extremely 

commoditized and homogenous

 However, the Government Bond, Corporate Bond and CDS, and IRS markets have a more complex product set 

relative to the Equity and FX markets

 All of these markets have a term structure of maturity tenors for a given issuer

 All of these markets have a broad array of benchmark and non-benchmark instruments across the maturity 

spectrum

There are distinct differences between the Fixed Income and Currency (FIC) markets and the cash Equity 

markets
59

Agenda

November 5, 2013

 Definitions, Protocols, Methods and Venues

 Overview and Evolution of Electronic Trading in the Fixed Income Markets

 US Treasuries

 Foreign Exchange

 Takeaways and Discussion Topics

 Appendix – Change Management, Access Controls and Security for Automated Trading

 Appendix – Fixed Income Market DtC Volumes
60

Treasuries as part of the Duration Spectrum

 Many market participants view Bond Futures, Eurodollar Futures, On-The-Run Cash Treasuries and 

Benchmark IRS as fungible sources of duration and yield curve exposure

 Given this fungibility, many market participants perform some degree of liquidity transformation across these 

markets 

 All of these instruments currently can be traded electronically. However, there is significant variability in 

protocols, methods and venues

 There continues to be a gradual convergence of trading protocols between On-The-Run Cash Treasuries, 

Benchmark IRS, Bond Futures and Eurodollar Futures

Cash 

Treasuries

Interest 

Rate Swaps

Eurodollar 

Futures

Bond 

Futures
61

Treasury Market Activity Structure and Implications

 Within the Treasury market, there are clear tiers of liquidity

 60% of the trading activity is concentrated in the on-the-run securities, despite their small share of total outstanding 

Treasury issuance

 Older, less liquid securities trade infrequently in less transparent markets

 As a greater share of Treasury volumes trade electronically, there may be even further concentration of activity 

in the on-the-run issues (along the lines of the cash equity experience in large caps versus small caps)

 This shift may benefit the Treasury as an issuer since further enhancement of liquidity in on-the-run issues may 

lead to reduced borrowing costs

 However, increasing bifurcation of activity between on-the-runs and off-the-runs may result in a continued 

divergence of liquidity between issues, which ultimately could lead to higher borrowing costs as participants 

demand a premium for eventual diminished liquidity in their aged holdings

 The net impact of these effects remains to be seen, but encouraging the liquidity of off-the-runs will help the 

Treasury Department keep borrowing costs down as other competing sources of liquid duration become more 

frequently electronically traded

% of US Treasury*

Market Value Total Volume**

On-the-Run 1.5% 60%

Liquid Off-the-Run*** 7% 23%

Illiquid Off-the-Run/ Strips/ TIPS 91.5% 17%

* Estimates; Includes Nominal Coupons, Strips, TIPS

** D2C

*** First 3 Off-the-Run and CTDs

Sources: Federal Reserve, US Treasury and other sources 
62

Agenda

November 5, 2013

 Definitions, Protocols, Methods and Venues

 Overview and Evolution of Electronic Trading in the Fixed Income Markets

 US Treasuries

 Foreign Exchange

 Takeaways and Discussion Topics

 Appendix – Change Management, Access Controls and Security for Automated Trading

 Appendix – Fixed Income Market DtC Volumes
63

Evolution of Electronic Trading in the FX Markets

ECNs: Electronic Communication Networks

SDPs: Single Dealer Platforms

Electronic trading in FX Spot began over 10 years ago. The migration to and evolution of electronic FX markets 

has been somewhat disjointed. The current state of the electronic FX markets is highly fragmented with a 

significant array of offerings and pools of liquidity

~ Year Who What

1992 Reuters & 

EBS

Interbank platforms enable anonymous click-to-trade capabilities leveraging bi-lateral credit lines

1999 FX All & FX 

Connect

ECNs which enable Multi-Dealer (DtC) platforms for RFQ on FX Spot and Forwards

2001 Hotspot ECN all-to-all platform for executing on streaming FX Spot levels with full anonymity

2002 FX Prime 

Brokers

Enable non-Dealers to access Reuters & EBS anonymously

2003 Bank Portals Banks begin to invest heavily in proprietary SDPs, providing both RFQ and streaming capabilities

2004 HFT Dealers and Proprietary Traders began to heavily invest in algorithmic market-making capabilities

2004 – 2012 ECNs Proliferation of ECNs with a broad variety of capabilities

2005 – 2013 Aggregators Aggregators emerge to consolidate fragmented liquidity across numerous platforms

2007 – 2013 Bank Portals 

& ECNs

Expand product offerings and invest in developing execution algorithms for clients

2009 – 2013 Bank Portals Bank’s centralize their internal flows across their disparate lines of business
64

Observations of Electronic Trading in the FX Markets

ECNs: Electronic Communication Networks

SDPs: Single Dealer Platforms

 Recently, there has been some evolution away from further market fragmentation due to a variety of forces

 Increasing sophistication of Bank SDPs and larger ECNs has pushed some Aggregators and smaller 

ECNs out of the market (they have lost market share and they cannot afford the ongoing R&D costs in 

execution algorithms)

 ECNs are seeing less activity as liquidity has been migrating back towards large Banks 

 Electronic market share has been gravitating back towards Bank SDPs as

 They have largely succeeded at centralizing all internal order flows across their various lines of 

business (Retail, Capital Markets, Treasury, Custody, etc.)

 Because of their global footprints, the largest banks also have the broadest liquidity pools for EM 

currencies, which have exhibited significant growth in volumes

 Bank portals have increased the breadth of their electronic offering to include complex Spot FX order 

types and execution capabilities for vanilla FX options

 A variety of End Users are increasingly relying on the Banks’ proprietary algorithmic execution tools

 Banks have become increasingly sophisticated in adjusting prices based upon their target risk profile 

and the types of order flows they are seeing

FX spot is a highly standardized and commoditized product. However, CLOB structures have not become the 

predominant electronic method and venue
65

Agenda

November 5, 2013

 Definitions, Protocols, Methods and Venues

 Overview and Evolution of Electronic Trading in the Fixed Income Markets

 US Treasuries

 Foreign Exchange

 Takeaways and Discussion Topics

 Appendix – Change Management, Access Controls and Security for Automated Trading

 Appendix – Fixed Income Market DtC Volumes
66

Takeaways and Discussion Topics

November 5, 2013

 There is not a universal definition of, or model for, electronic trading in Fixed Income

 The evolution of electronic trading in the Fixed Income markets continues to be a gradual and highly fluid 

process

 High-Frequency and Algorithmic Trading market participants help provide liquidity to the Treasury markets, 

given the high degree of correlation across other duration-sensitive products

 Firms that participate in HFT and AT are acutely cognizant of the risks of these activities, and have a strong incentive to 

implement the appropriate quality control measures (see Appendix)

 Based upon the Equity and FX experiences, there is the potential for significant fragmentation of liquidity. This 

is further compounded by the fact that the Fixed Income product set is typically more heterogeneous and less 

commoditized than the cash equity and spot FX markets

 It is highly unlikely that a singular end-state electronic trading solution will emerge across Fixed Income due to 

the heterogeneous product set and the diversity of needs across various market participants

 Anonymous central limit order books are suitable for fully standardized and commoditized products with well-developed realtime mandatory Central Clearing

 Even for products meeting this criteria, the evolution towards a CLOB model can cause near-term liquidity stresses as 

traditional providers of liquidity are disrupted

 For less-standard, less-commoditized or non-cleared products, attributes such as anonymity, CLOBs, and streaming executable 

pricing are not ideal (and potentially not even appropriate)
67

Takeaways and Discussion Topics (continued)

November 5, 2013

 Asynchronized mandates for Central Clearing and electronic trading are creating stresses on the tight linkages 

between the Government Bond (and Repo), Interest Rate Swap, Listed Interest Rate Futures (Eurodollar and 

Treasury) and Corporate Credit (Bond and CDS) markets

 There are many types of transactions across the Fixed Income markets that involve the simultaneous and/or 

contingent execution of two or more instruments (referred to as “Package Transactions”)

 Forcing part of a Package Transaction (e.g., an Interest Rate Swap) onto a SEF on a standalone basis could disrupt the 

liquidity of the whole package (e.g., a Swap Spread or Invoice Spread package) absent a reliable mechanism for 

simultaneous execution (such as the Exchange for Risk (EFR) process in the futures market, which allows an IRS and a bond 

future to be traded together off-exchange)

 This could have serious adverse knock-on effects, as the markets in Package Transactions greatly contribute to, and facilitate 

liquidity provisioning in, the markets for the individual component instruments of such Packages

 Treasury liquidity could be negatively impacted by a disruption to the IRS markets during SEF implementation

 Implications for SEF implementation and Made Available for Trade (MAT) determinations for IRS and CDS

 To avoid liquidity disruptions to the Fixed Income markets, MAT determinations for the IRS and CDS markets could be done 

in a phased approach, with Phase 1 being limited to only the most liquid USD and EUR IRS (i.e., spot starting benchmark 

swaps) and Current Series Index CDS

 Subsequent Phases could then incorporate additional outright swaps, as well as certain Package Transactions

 A data-driven / metrics-based approach should be used to determine which additional products / packages are best suited for 

inclusion in the future Phases

 At each phase, it is essential to maintain a reliable mechanism for Package execution, such as EFR

 A phased implementation approach proved successful during the roll-out of mandatory central clearing
68

Agenda

November 5, 2013

 Definitions, Protocols, Methods and Venues

 Overview and Evolution of Electronic Trading in the Fixed Income Markets

 US Treasuries

 Foreign Exchange

 Takeaways and Discussion Topics

 Appendix – Change Management, Access Controls and Security for Automated Trading

 Appendix – Fixed Income Market DtC Volumes
69

Automated Trading Standard Protocol – Change Management

November 5, 2013

 Software Development

 Maintain separate yet identical development, testing, and production environments

 Utilize source code management tools to identify why, when, who, and what was changed

 Define deliverable-oriented methodology to mitigate the risk of actual results not matching expected results

 Take into account the size of team and safeguard sensitive information as appropriate

 Ensure traceability of support code to enable recall of the state of the system (i.e., reproduction of issues)

 Establish physical and technological security measures as well as authentication mechanisms

 Use a software framework with well defined interfaces for maximum reuse which has a clear delineation between separate 

shared, common libraries and functions and business specific libraries and functions 

 Build in automated fail-over and recovery mechanisms

 Software Testing

 Segregation of duties between development and testing to avoid conflicts of interest 

 Simulation – Backtest the performance of an algorithm and compare to actual results

 Unit/Functional – Test that the system functions as designed

 Quality – Test how well the system performs under extreme scenarios

 User Acceptance – Test that the work flow is as expected

 Conformance Testing – Where appropriate and available certify that the system passes exchange / ecn tests

 Release Management

 Segregation of duties between development and production to avoid conflicts of interest 

 Centralized control of all releases with a release management team

 Conduct cross functional meetings prior to releases with appropriate approval and signoff

 Deploy Pilot releases (by trade, symbol, position limit, markets, etc.) to ensure cautious and controlled rollout

NOTE: Additional information can be found in Futures Industry Associations (FIA) Principal Traders Group (PTG) European Principal Traders Association (EPTA) 

“Software Development and Change Management Recommendations “ document which contains best practices for software development, testing, and change management
70

Automated Trading Standard Protocol – Access Controls

November 5, 2013

 Published Rules

 Many regulatory agencies have published rules related to market access controls

 SEC – Rule 15c3-5 market access controls effective 7/14/2011

 FSA – ESMA guidelines on systems and controls in an automated trading environment for trading platforms, 

investment firms and competent authorities effective 5/1/2012

 SFC – Code of conduct for electronic trading effective 1/1/2014

 Goals

 In general they aim to

 Promote fair and orderly trading in automated trading environments

 Prevent market abuse in automated trading environments

 Prevent uncontrolled direct market access and or sponsored access in automated trading environments
71

Automated Trading Standard Protocol – Access Controls

November 5, 2013

 Compliance with the Goals of Access Controls

 Preventative/Pre-Trade controls which ensure appropriate market access controls are built into the system to prevent

 Clearly erroneous orders both in size and price relative to a reference price 

 Duplicative and/or replayed orders

 Thrashing orders

 Orders (including open and executed) which would exceed established capital limits

 Detective controls which ensure appropriate monitoring tools are built into the systems with multiple automated and 

human groups monitoring system

 System – Hardware/Software components functioning properly

 Market – market interactions are online – market data publishing, order messages and latency, and trade 

matching

 Performance – P&L monitoring is functioning, actual P&L matches expected P&L

 “Fuse Box” or “Kill Switch” controls which warn and if need be shut down trading; thereby, minimizing the impact of 

erroneous code, processes or orders on firm and marketplace

 Warn via real time monitors and email alerts when defined warning threshold is breached

 Shut down when defined error threshold is reached

 Supervisory Procedures, Reviews, and Training which ensure goals are documented and clearly communicated to 

responsible parties
72

Automated Trading Standard Protocol – Security

November 5, 2013

 Physical access

 Office

 Access controlled by key cards or similar means of security enabled for access to only appropriate floors/areas

 Monitoring provided by dedicated security team

 Periodic tests of security access policies and procedures

 Data Center

 Access to data center and co-location cages controlled by key cards or similar means of security

 Utilize providers with access governed by standards such as SAS 70

 Monitoring provided by dedicated security team

 Periodic audits of access to cages and who has approval rights

 Periodic tests of security access policies and procedures

 Logical access

 Access

 Use of a single directory store for authentication and authorization to systems with auto-provisioning/de-provisioning

 Annual review of access and entitlements by the business users

 Segregation of duties/access to avoid conflicts of interest across business lines

 Two factor authentication for remote access

 Protection against unauthorized access/intrusion

 Monitoring of network traffic to determine non-standard outbound communications

 Decrypting and filtering of network traffic with blocking of unacceptable web sites

 Detection tools to capture outbound files for review of potential data leakage

 Block Denial of Service attacks with assistance from Internet Service Providers 

 Network and host-based detection and blocking of spam and malware

 Patches are reviewed, tested and deployed in a timely fashion

 Monitoring of communication lines for high bandwidth utilization not associated to business processing 

 24x7 monitoring and responding of operational/security events by a Network Operations Center
73

Agenda

November 5, 2013

 Definitions, Protocols, Methods and Venues

 Overview and Evolution of Electronic Trading in the Fixed Income Markets

 US Treasuries

 Foreign Exchange

 Takeaways and Discussion Topics

 Appendix – Change Management, Access Controls and Security for Automated Trading

 Appendix – Fixed Income Market DtC Volumes
74

Sources: DTCC and other sources. Notes: Average Trade Sizes are notional values traded in $MM. EGB Core includes France, Germany, Netherlands, Italy. IRS data excludes cross-currency swaps. 

Fixed Income Market DtC Volumes

D2C Market D2C Trading Protocol IDB / Exchange

ADV ($ MM)

ADV (Trade 

Count)

Avg. Trade 

Size ($ MM) RFQ ALLQ

FirmSpecific 

Streaming

Co-Mingled 

Streaming FX-Style

Fully 

Electronic 

IDB

VoiceHybrid IDB

US Treasuries

Nominals

OTR 27,555 3,693 7.46   

OFTR 22,545 3,540 6.37   

Total Nominals 50,100 7,234 6.93

Bills 23,243 903 25.74   

TIPS 1,274 621 2.05   

STRIPS 483 193 2.50   

EGB - Core

Nominal 7,169 2,390 3.00    

Inflation 167 186 0.90    

EGB Non-Core 1,319 925 1.43    

Gilts

Nominal 1,324 415 3.19    

Inflation 62 191 0.32    

IRS

EUR 10,491 221 47.46    

 



USD 8,124 195 41.65     

GBP 4,265 153 27.84    

 

Cash Credit

US Cash Credit (IG) 1,432 2,386 0.60   

US Cash Credit (HY) 120 239 0.50   

European Cash Credit 3,428 8,563 0.40   

CDS

NA Single Name 4,459 637 7.00  

EUR Single Name 4,140 414 10.00    

NA Indices 28,280 618 45.76     

EUR Indices 21,439 618 34.69      





