Demand increases for further transparency on US Treasury Market

The new demand for data stems from October 2014 when a strong swing in Treasury prices left regulators scratching their heads in the face of the zig-zag performance of bond prices over a 24-hour period. 

Since then concern has grown around the insufficiency of pricing and trading information available in comparison to other broadly traded markets.

The timing of this new drive for information comes as developing technologies and increases in pressures on traders are putting the traditional business model through a period of marked transition. Low interest rates have compounded this as a critical time for the government bond market.

Kevin McPartland, speaking for Greenwich Associates, said: "The rules governing the treasury market are over a decade out of date. It's time to take a look and see how the market has evolved and how rules need to adapt."

Government bond trading has been the traditional preserve of the primary dealers, who are bound to aiding the US Treasury in its mission to underwrite national debt. According to traders, the primary dealers have thus far enjoyed access to the restricted data on investor's trading behaviours. However, recent big-name exits from banks have shown that not all dealers have been successful. 

High-frequency trading firms have been calling for more transparency in the market; the gradual strengthening of HFT companies has slowly undermined the strong position traditionally enjoyed by primary dealers. 

Stephen Berger of Citadel said: "For one of the largest, most liquid markets in the world to have so little transparency is surprising. Improving transparency is the logical starting point for reform."

Essentially, two trading zones exist within the treasury market. Trades between investors and banks are usually conducted over the phone, while those between big banks and other major parties usually take place electronically. 

Most non-bank players have risen through electronic trading which has an element of transparency. But regulators do not enjoy such vision where deals between traders and investors are concerned. 

Some information is collated on a weekly basis from primary dealers by the New York Fed, and Bloomberg stands as an example of a data provider that shows the standing price of benchmark securities. However, these indicators are not always to be trusted as market health checks.

Head of Fixed Income at KCG, Issac Chang has called for prices to be made publicly available so that any party can buy or sell, while being aware with the volume they can leverage at the given price.

Mr Chang asked: "If you have a market that was once large dealers interacting with end users and now you have less dealer presence how do you evolve to maintain liquidity? Increased transparency will help encourage participation and maintain liquidity."

However, key figures within the industry have said that such an approach would only encourage high-frequency traders and lead to the proliferation of high-speed algorithms used by banks to execute trades. 

 Reports following each transaction have also been suggested, although many concede that implementation of this would take a unique course for each bank and trading company.