William C Dudley: The evolving structure of the US treasury market Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at The Evolving Structure of the U.S. Treasury Market: Second Annual Conference, Federal Reserve Bank of New York, New York City, 24 October 2016. * * * On behalf of the New York Fed and our co-sponsors, it is my pleasure to welcome you to this second annual conference on the evolving structure of the U.S. Treasury market. We have the opportunity today to continue the dialogue around the changing nature of the Treasury market, a discussion that grew more urgent following the events of October 15, 2014.1 We have made significant progress since last year’s conference in improving our collective understanding of the Treasury market, and I believe it is important to continue official and private sector collaboration on this topic. Indeed, there is much left to do to ensure the continued integrity and effectiveness of this market, and I look forward to the further progress we will make today. As always, what I have to say today reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System.2 Over the past year, the Joint Member Agencies 3 have engaged with market participants and other members of the public to gain more information on the changing structure of the Treasury market.
They are evolving rapidly, they are highly automated in key market segments, and information on trading activity is not widely available. As a result, it is challenging for the official sector, market participants, and members of the public to effectively analyze these markets, understand the sources and risks of flash events, and evaluate how liquidity is changing. Given the role of the Treasury market as the deepest and most liquid fixed income market in the world, it is clear that both the official sector and the public need improved access to transactionlevel data, and I am pleased that we are making real progress on this front. Greater transparency into Treasury market activity is necessary in maintaining the market’s many important roles: as a risk-free benchmark for financial instruments; as a liquid investment and source of safe collateral; as a channel for the implementation of monetary policy; and, of course, as a tool to help finance U.S. government activities. As the Treasury market continues to evolve, several complex questions lie ahead. How should data reporting gaps be closed to ensure that as many relevant Treasury transactions as possible are collected? What is the proper scope and best process for sharing Treasury market data with the public? How can the Joint Member Agencies and private stakeholders best collaborate to ensure Treasury market stability and efficient market function, even as market structure evolves and new technologies emerge?