NEW YORK, March 14 /PRNewswire/ -- The Bond Market Association today
submitted a letter to the Treasury Department proposing certain rule changes
aimed at speeding up the calculation and announcement of Treasury auction
results while, at the same time, reducing the chances for mistakes or
erroneous reporting. Specifically, the Association is advocating certain
limited modifications to the Treasury's Net Long Position ("NLP") rules. These
rules require the largest auction participants to report their indirect
pre-auction positions in the to-be-issued Treasury security when submitting
their bids.
"The Bond Market Association is proposing certain common sense changes to
Treasury's Net Long Position rules which will allow auction results to be
calculated and announced by Treasury more quickly," said Eric L. Foster, vice
president and assistant general counsel for the Bond Market Association's
Government and Federal Agency Securities Division.
The Association is proposing three rule changes. First, the Association is
recommending the Treasury consider raising the thresholds over which bidders
are required to report their net long positions. Currently, bidders must
report their NLP position plus their total bids if they exceed $1 billion in a
bill auction or $2 billion in a note or bond auction. The Association proposes
the Treasury consider a higher threshold which would require NLP reporting
from only those bidders most likely to exceed the 35 Percent Rule, which
refers to the total amount of a single issuance any one bidder is allowed to
be awarded.
The Bond Market Association also recommends that Treasury require bidders
to calculate their NLP as of 12:40 p.m. rather than 12:30 p.m. in order to
further enhance the integrity of the auction process. Choosing a deadline any
closer to the 1:00 p.m. close of the auction significantly increases the
chances for submission error. Large bidders typically have to accumulate data
from several sources and they need a reasonable amount of time to accurately
calculate and report their NLP positions.
Finally, the Association proposes Treasury eliminate the obligation that a
firm bidding above the reporting threshold but short or flat the auctioned
security report a zero Net Long Position. Requiring bidders to report a zero
does not appear to offer any substantive benefit but, on the other hand, would
seem to increase the chance for errors.
In its letter to the Treasury Department, The Bond Market Association also
urges Treasury to accelerate the rollout this year of TAAPSLink v2.0 -- the
newly developed interface between Treasury and the Primary Dealers. Usage of
the new TAAPSLink v2.0 platform by Primary Dealers will undoubtedly facilitate
faster auction turnaround times. In the event Treasury is unable to roll-out
TAAPSLink v2.0 soon, The Association also believes Treasury should consider
promptly developing and implementing improvements to the current FedLine
system that will help identify and prevent typographical errors and rule
violations before bids are submitted.
The Bond Market Association represents securities firms and banks that
underwrite, trade and sell bonds in the international and domestic markets.
SOURCE Bond Market Association
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Related links:
http://www.bondmarkets.com
CONTACT:
Myra L. Dandridge, +1-202-434-8421, or Jon
Teall, +1-212-440-9426, both for Bond Market Association
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