While the recent joint staff report on the events of October 15 certainly revealed that much has changed, it is also important to recognize that both private and official sector efforts to ensure a healthy and efficient Treasury market have been ongoing for some time. 3 One obvious example is the Treasury Market Practices Group, or the TMPG. Set up in February 2007, the  1  What I have to say today represents my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System. 2  See Regulation and Liquidity Provision, remarks at the SIFMA Liquidity Forum, September 30, 2015. 3  Joint Staff Report: The U.S. Treasury Market On October 15, 2014. BIS central bankers’ speeches  1  TMPG is a group of market professionals committed to supporting the integrity and efficiency of the Treasury market. 4 A core purpose of the TMPG is to develop and update a set of best practices related to trading, settlement and risk management, thereby establishing a set of behavioral norms to which market participants are expected to adhere. Most recently, the TMPG updated its best practice guidance to address automated trading, and published a companion white paper on the subject.
Less traditional firms, often with a primary focus on automated, low-latency trading strategies, have entered the arena and helped to transform the landscape. In addition to adapting to these changes, traditional broker-dealers are complying with a more rigorous regulatory framework and are also expanding their use of automated trading technologies. These developments raise a number of important questions. They include: Who are these new entrants and what are their motivations? Has the changing composition of firms affected the nature of market making and liquidity provision? How have traditional liquidity providers responded to the expanded use of new technology? Has the changing structure introduced operational risks in the clearing and settlement infrastructure? How has the evolution of the repo market affected the secondary market for Treasury securities? Are the regulatory requirements imposed upon the Treasury market sufficient in today’s world? And finally, are there any changes – regulatory or otherwise – that could improve the functioning, efficiency and/or integrity of the Treasury market? As I noted in my recent remarks on market liquidity, many open questions remain on the subject of Treasury market liquidity. 2 At the same time, the agenda for this conference makes it clear that there are many other important questions beyond market liquidity worthy of consideration and debate. The breadth and expertise of the attendees at this conference make this forum an excellent opportunity to advance our collective thinking on this range of important subjects.