In remarks at the Brookings Institution today, Federal Reserve Governor Jerome Powell discussed how structural changes may be affecting liquidity in Treasury markets. Powell noted that new market participants, a changing business model for traditional brokers, and an adjustment to post-crisis regulation are all impacting markets today. The most fundamental change in Treasury markets? The growth in electronic trading. Powell explained, “Compared with the speed of trading 20 years ago, anyone can trade at high frequencies today, and so, to me, this transformation is more about technology than any one particular type of firm.”
Taken together, these factors have contributed to a new dynamic in Treasury markets. Powell echoed the recommendation in last month’s Joint Staff Report for a public discussion to evaluate this new structure. The conference will take place this fall at the Federal Reserve Bank of New York, with representatives from Treasury, the Fed Board of Governors, the SEC, and the CFTC.
We’re looking forward to engaging in this discussion and working to continue improving our markets’ liquidity, efficiency, and transparency.