The Evolution of Workups in the U.S. Treasury Securities Market

Michael Fleming, Ernst Schaumburg and Ron Yang

No 20150820, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: The market for benchmark U.S. Treasury securities is one of the deepest and most liquid in the world. Although trading in the interdealer market for these securities is over-the-counter, it features a central limit order book (CLOB) similar to that found in exchange-traded instruments, such as equities and futures. A distinctive feature of this market is the ?workup? protocol, whereby the execution of a marketable order opens a short time window during which market participants can transact additional volume at the same price. With the broadening of the interdealer market to include hedge funds and proprietary trading firms, and the increase in trading activity, some market participants consider the workup to be somewhat of an anachronism that is destined to lose its relevance relative to the CLOB. Contrary to this notion, we document the continued important role played by the workup, show some ways in which trading behavior in the workup has evolved, and explain some of the observed changes.

Keywords: Liquidity; Treasury Market; Workup (search for similar items in EconPapers)
JEL-codes: G1 (search for similar items in EconPapers)
Date: 2015-08-20
New Economics Papers: this item is included in nep-mst
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