it could seriously impair market functioning. but at the same time, it doesn ’ t make sense to simply outlaw the practice, since that limits flexibility in a way that may not always be called for and would likely reduce market liquidity. the tmpg ’ s recommendations were carefully calibrated to set financial incentives that would minimize fails and have been a marked success. the tmpg also plays an important role in helping to “ fill in the cracks ” between the competing regulations that various treasury market participants face. many different institutions and individuals depend on these markets, and the regulatory system reflects that. the government securities act gave the treasury department some rulemaking authority over all government securities brokers and dealers. but the act also required these firms to register with the sec. at the same time, the federal reserve regulates many of the banks that are active in these markets, and the federal reserve bank of new york also plays an essential role, both as fiscal agent for the u. s. government and, by nature of its frequent activity in these markets, in conducting monetary policy operations. and of course, the commodity futures trading commission regulates treasury futures markets. the agencies work well together, but there is real value in having an industry group help to identify issues that cross regulatory boundaries. i ’ ll give two examples. first, in 2016, the tmpg conducted a study of financial benchmarks and uncovered uses of icap ’ s federal funds open rate that had not previously been well understood. 2 as icap decided to stop publishing the rate, the tmpg also helped to guide market participants to an alternative that is aligned with the international organizations of securities commissions principles for financial benchmarks while steering the market away from the london interbank offered rate ( libor ) as a potential alternative — a move that now seems prescient given the subsequent news around the long - run risks to libor. more recently, the tmpg has been busy creating a map of clearing and settlement in treasury markets, work that i am sure all of the regulatory agencies will find to be of great interest. all of this is incredibly valuable. in fact, my only regret about the tmpg is that we didn ’ t think of creating something like it earlier. as regulators, we fully support your work, and will continue to make sure that our own rules support these markets. the financial industry regulatory authority ’ s ( finra ’ s ) new collection of the treasury transactions of its members through its

still gives me nightmares. 1 after the dust settled, we had to grapple with the wider implications of the scandal for the market itself and particularly the role of regulatory oversight. we certainly could have used a tmpg to help us with this work, but none existed at that time. our recommendations were summarized in a joint report to the congress issued by the treasury department, the securities and exchange commission ( sec ), and the federal reserve board. among the issues we considered were how to encourage a level playing field for all market participants, and when and where regulators should respond to the periodic technical difficulties the market sometimes experienced. as we drew up the report, we were deeply aware of the importance that treasury markets held for the american economy. the sale of treasury bonds, notes, and bills finances the u. s. government, and those securities are in turn a primary vehicle for savings for a wide range of u. s. households. treasury securities are also an important source of collateral within the financial system. this last role has become all the more critical in recent years as regulations have required banks to hold larger amounts of high - quality liquid assets so that they can safely meet their potential liquidity needs. we also knew that, despite the misconduct by salomon brothers, treasury markets generally worked quite well. these markets are and have long been among the deepest and most liquid markets in the world. it was important to make the auction system more robust to potential manipulation, and we made several recommendations to do so and to open up the process to greater competition. however, in other areas that already worked well, we chose, for example, to 1 / 3 bis central bankers'speeches open up issuance of securities that were in short supply ( or “ squeezed ” ) when needed rather than to risk negatively affecting the functioning of treasury markets by instituting more invasive regulation. there is certainly a role for regulation, but regulation should always take into account the impact that it has on markets — a balance that must be constantly weighed. more regulation is not the best answer to every problem. there is also a role for a body such as the tmpg to address market problems. the tmpg ’ s approach to “ fails ” in the treasury and mortgage - backed securities markets provides a good example. fails — that is, the failure to deliver collateral in either a cash or repurchase agreement transaction — impose a cost on the party expecting delivery. if the practice were to become too frequent, then