The Federal Reserve Bank of New York welcomes today’s implementation of the Treasury Market Practices Group’s (TMPG) recommendation that settlement fails in U.S. Treasury securities transactions be subject to a financial charge when short-term rates are low. The TMPG worked with both buy- and sell-side market participants to address a weakness in market practices that became apparent last fall when short-term market interest rates neared zero.
The New York Fed has adopted this new trading practice in its own market operations and continues to encourage its adoption by all market participants.
"We applaud the dedicated efforts of the TMPG in spearheading the development and implementation of this targeted solution to the settlement fails problem," said New York Fed President William Dudley. "This significant milestone in the evolution of Treasury market practice demonstrates that groups, such as the TMPG, are effective in addressing deficiencies in market functioning and facilitating market best practices."
The New York Fed acknowledges all of the market participants who joined this effort to develop this new trading practice guidance. In particular, the Securities Industry and Financial Markets Association, the Fixed Income Clearing Corporation, the Securities and Exchange Commission and the U.S. Treasury Department have provided critical support and guidance throughout this process.