The dealer-trader distinction and Treasury market regulation

If it walks like a dealer and talks like a dealer… apparently, it’s not always a dealer.
Sometimes it’s an unregulated trader.
Bear with us here.
First, some background.
On Monday, there was a Treasury market-structure conference at the New York Fed,…

If it walks like a dealer and talks like a dealer... apparently, it's not always a dealer.

Sometimes it's an unregulated trader.

Bear with us here.

First, some background.

On Monday, there was a Treasury market-structure conference at the New York Fed, where regulators said in no uncertain terms that the no-oversight party is over. They've put rules in place requiring transaction reporting for banks, as well as broker-dealers registered with the Financial Industry Regulatory Authority. But there's more work to be done, which we'll get to shortly.

Continue reading: The dealer-trader distinction and Treasury market regulation

Guest post: Small-cap trading revamp is no more than a costly distraction

The US equity market is about to start a two-year programme testing changes for small-cap equity trading. This guest post from Richard Johnson, a market-structure and technology strategist with Greenwich Associates, argues that the costs of the program…

The US equity market is about to start a two-year programme testing changes for small-cap equity trading. This guest post from Richard Johnson, a market-structure and technology strategist with Greenwich Associates, argues that the costs of the programme may outweigh the benefits.

_____

Continue reading: Guest post: Small-cap trading revamp is no more than a costly distraction

Revising the taxonomy of trading venues

People love to use the word `evolution’ while discussing market structure. So we’ll extend that metaphor and change a couple of names in our taxonomy of Treasury-trading platforms.
LiquidityEdge, a venue that started last year, is planning a new centra…

People love to use the word `evolution' while discussing market structure. So we'll extend that metaphor and change a couple of names in our taxonomy of Treasury-trading platforms.

LiquidityEdge, a venue that started last year, is planning a new centralised platform where investors, banks and high-speed trading firms can trade anonymously, according to a letter from the platform to its clients. It'll also allow traders to select which types of counterparties he or she wants, or doesn't want. The platform is expected to start operating in September, according to people familiar.

At the same time, another centralised, anonymous platform, Direct Match, seems like it's close to shutting down, as Joe Rennison covered yesterday.

We classify both of those in the "All-to-All" genus of trading venues -- a close relative of the "Exchange" genus -- where investors, dealers and high-speed firms can trade anonymously. (Note: Those venues' existence remains purely theoretical in the Treasury market, since none of them have been shown to actually survive in that environment.)

Continue reading: Revising the taxonomy of trading venues

Are traders allowed to front-run customer orders in the Treasury market?

The Securities and Exchange Commission wants to know.
In a letter to the Financial Industry Regulatory Authority, the SEC’s markets division draws attention to a handful of trading rules that either don’t apply to Treasuries, or aren’t clear about whe…

The Securities and Exchange Commission wants to know.

In a letter to the Financial Industry Regulatory Authority, the SEC's markets division draws attention to a handful of trading rules that either don't apply to Treasuries, or aren't clear about whether they do. The group requested that Finra review its rulebook, and then either justify or remove any exemptions for US government debt.

See, if you're a logical person who doesn't know much about Treasuries, you'd assume the exemptions and unclear rules would be about minor stuff. But what's truly bewildering is how serious the rules on that list are.

Continue reading: Are traders allowed to front-run customer orders in the Treasury market?

A would-be disruptor hits a Treasury-market-shaped wall

To those who don’t follow Treasury markets, Direct Match might sound like a ruthlessly efficient dating website. Go on one date with a partner meticulously chosen by high-powered algorithms, and end up married within a week.
In reality, Direct Match wa…

To those who don't follow Treasury markets, Direct Match might sound like a ruthlessly efficient dating website. Go on one date with a partner meticulously chosen by high-powered algorithms, and end up married within a week.

In reality, Direct Match was a trading platform attempting to upend the way investors buy and sell U.S. government securities.

It also appears to be closing down, according to a Business Insider post from Jim Greco, the company's founder.

Continue reading: A would-be disruptor hits a Treasury-market-shaped wall

The establishment is still winning (in the bond market)

It’s been a tough year for The Establishment, what with all the disrupting and the Brexiting and the Trumping.

But in the bond market, the incumbents are hanging on.

Continue reading: The establishment is still winning (in the bond market)

It’s been a tough year for The Establishment, what with all the disrupting and the Brexiting and the Trumping.

But in the bond market, the incumbents are hanging on.

Continue reading: The establishment is still winning (in the bond market)