‘Govie’ Market Structure Assessed


The first phase of the U.S. Department of the Treasury’s review of the market structure for government bonds, or ‘govies’, will end when the department’s request for information’s comment period closes on March 22.

Despite a level of comment-letter fatigue the financial market community might have from various regulatory proposals from the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, market participants need to respond to the RFI, urged to Matthew Kulkin, a partner at law firm Steptoe & Johnson.

“This is a Treasury request for information and not an initiative from the SEC, CFTC or the Department of Labor,” Kulkin said on a webinar. “It important that they receive something that really helps underscore the depth and breadth of the Treasury market.”

Micha Green, chairman, financial services practice at Steptoe, was optimistic that those who wrote the RFI already were aware of the nuances between on-the-run and off-the-run instruments, as it pertains to regarding regulation, transparency, fairness, and liquidity. “Sometimes those arguments fall on potentially uninformed ears,” he said. “They’re not ill-intending ears, but just under-informed ears.”

The Treasury is focusing primarily on the on-the-run market, since the joint-staff report on the October 15, 2014 market events is the analytical basis for the RFI, according to John Collins, a partner at Steptoe. “That was an on-the-run event,” he said. “The RFI’s four sections are the same as the enumerated steps for analysis in the staff report.”

Green also warned that Treasury market participants should not assume that the current Presidential election cycle will delay or eliminate the Treasury’s market-structure review.

“Although the Secretary of the Treasury, Deputy Secretary and several Assistant and Deputy Assistant Secretaries might change, there is a body of professionals in that building who will spent a lot of time on the RFI, will review the responses, and will be the starting point for the next Secretary of the Treasury and their staff, whoever it might be.”

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