Primary Dealer Participation in the Secondary U.S. Treasury Market

Michael Fleming, Frank M. Keane and Ernst Schaumburg

No 20160212, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: The recent Joint Staff Report on October 15, 2014, exploring an episode of unprecedented volatility in the U.S. Treasury market, revealed that primary dealers no longer account for most trading volume on the interdealer brokerage (IDB) platforms. This shift is noteworthy because dealers contribute to long-term liquidity provision via their willingness to hold positions across days. However, a large share of Treasury security trading occurs elsewhere, in the dealer-to-customer (DtC) market. In this post, we show that primary dealers maintain a majority share of secondary market trading volume when DtC trading is taken into account. We also use survey data on large dealers to characterize activity in the DtC market and discuss some of the gaps in the available Treasury trading volume data.

Keywords: Treasury; Trading volume; Dealer (search for similar items in EconPapers)
JEL-codes: G1 G2 (search for similar items in EconPapers)
Date: 2016-02-12
New Economics Papers: this item is included in nep-mst
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