For the first time, the Financial Industry Regulatory Authority has started reporting aggregate data on the trading volume of Treasury securities reported to FINRA’s Trade Reporting and Compliance Engine, the regulator said Tuesday.
The move was designed to “provide more transparency” to the marketplace, FINRA said. Securities firms started reporting Treasury transactions to FINRA in July 2017 in a move that was designed to provide regulators and policymakers with additional information to boost understanding and “enhance surveillance of this bellwether market,” according to FINRA.
FINRA’s launch of the data followed discussion with the U.S. Department of the Treasury, FINRA spokesman Ray Pellecchia told ThinkAdvisor. He pointed to comments made by Deputy Treasury Secretary Justin Muzinich on Sept. 23 at the 2019 U.S. Treasury Market Structure Conference in New York.
At the time, Muzinich said regulators were “missing comprehensive transaction data” for the Treasury market and the Treasury Department was “working with FINRA to release aggregated data on Treasury volumes for public dissemination.” At the time, the details were “still being worked out, but our recommendation is for FINRA to release the data weekly, with the first publication early” in 2020, he said.
The release of aggregate market volumes would be beneficial for three reasons, according to Muzinich. “First, we think the market will find it very useful to understand how volumes fluctuate, whether as a result of seasonal flows or in response to significant events,” he said at the time.
The data would also “ensure a more level playing field” and would not only be “consistent with one of our key principles, in that it should have no negative impact on market behavior or liquidity,” but also provide a “better understanding of how much volume is passing through the market, particularly in off-the-runs,” Muzinich said. He predicted the latter “should encourage even greater interest in those securities.”
The new Treasury Aggregate Statistics report by FINRA provides trading volume in U.S. Treasury securities reported to TRACE for the prior week. The information is aggregated by Treasury security subtype, including: bills, floating-rate notes, nominal coupons and Treasury inflation-protected securities, FINRA said. The regulator is also grouping the data into two categories: alternative trading system/interdealer transactions and dealer-to-customer transactions. For nominal coupons and TIPS, the report also shows remaining maturity and on-the-run/off-the run buckets.
According to FINRA, for the week of March 6, bills traded totaled $567 billion, including $151.8 billion ATS/interdealer and $415.2 billion dealer to customer. Meanwhile, FRNs totaled $16.7 billion, including $2.5 billion ATS/interdealer and $14.3 billion dealer to customer; nominal coupons totaled $4.97 trillion, including $2.99 trillion ATS/interdealer and $1.98 trillion dealer to customer; and TIPS totaled $119.3 billion, including $35.6 billion ATS/interdealer and $83.7 billion dealer to customer. Combined, transactions totaled $5.68 trillion, including $3.18 trillion ATS/interdealer and $2.5 trillion dealer to customer, according to FINRA.
“Publishing this important data will increase transparency for the benefit of investors and other market participants,” according to Thomas Gira, executive vice president of FINRA Market Regulation and Transparency Services. “We look forward to continue working with the Treasury Department, the SEC and the Federal Reserve Board to advance market transparency and sound oversight and policymaking.”
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