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US Treasury Dealers Accused of Collusion By Big Investors – FT

Full Article: Financial Times

A group of 17 US public pension funds and insurers have filed a lawsuit in New York alleging that their access to some electronic trading venues in the world’s biggest government bond market was blocked by a group of banks.

Comments
  • Charlie
    CharlieNovember 24, 2017"I agree with previous comments on the alleged auction collusion -- that's just wrong, if the allegations are true. On the IDB thing, it's important to remember what service market makers are providing and what risks they face. They are REQUIRED to make a market. They don't have the buy-side's luxury of buying or selling when they want to -- they are required to take the other side. The bid-offer compensates not just for the use of balance sheet, but also for the risk…"
  • Goose
    GooseNovember 17, 2017"I don’t have a law background, and my days being on a desk are a bit behind me, but my 2 cents. Auction Charge - It seems like a bit of time was spent talking about client auction information being shared internally across the treasury sales and trading desks. Maybe things have changed, but I don’t see how you could avoid overhearing market color on who is doing what across either desk, perhaps that’s just supporting fodder to show the dealer’s didn’t have any procedu…"
  • Wolfman
    WolfmanNovember 17, 2017"Regarding the auction complaint, the behavioral change raises a red flag. Regarding collusion, the structure of the bifurcated market arguably benefitted the buy side. Dealers regularly provided their clients with better liquidity at the moment than the dealers themselves enjoyed. They placed their capital at risk and delivered an immediacy of trade to their clients.…"
  • Viper
    ViperNovember 17, 2017"On the auction scandal. If there is actually collusion going on in chat messages then that is bad. It is what busts the dealers in every case even if the underlying act is benign. I used to always lose money bidding in auctions so I am struggling to even understand how this scheme would work. However, undoubtably, information is power and understanding where major customers are bidding would be extremely valuable. A lot of the data depends on post June 2015 observatio…"

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4 Comments on "US Treasury Dealers Accused of Collusion By Big Investors – FT"

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Viper
Member
On the auction scandal. If there is actually collusion going on in chat messages then that is bad. It is what busts the dealers in every case even if the underlying act is benign. I used to always lose money bidding in auctions so I am struggling to even understand how this scheme would work. However, undoubtably, information is power and understanding where major customers are bidding would be extremely valuable. A lot of the data depends on post June 2015 observations and there is just not that many of them. Since the crisis, dealers have been in a long-term… Read more »
Wolfman
Member

Regarding the auction complaint, the behavioral change raises a red flag. Regarding collusion, the structure of the bifurcated market arguably benefitted the buy side. Dealers regularly provided their clients with better liquidity at the moment than the dealers themselves enjoyed. They placed their capital at risk and delivered an immediacy of trade to their clients.

Goose
Member
I don’t have a law background, and my days being on a desk are a bit behind me, but my 2 cents. Auction Charge – It seems like a bit of time was spent talking about client auction information being shared internally across the treasury sales and trading desks. Maybe things have changed, but I don’t see how you could avoid overhearing market color on who is doing what across either desk, perhaps that’s just supporting fodder to show the dealer’s didn’t have any procedures and policies in place around auction process. Now, the dealers sharing this information with each… Read more »
Charlie
Member
I agree with previous comments on the alleged auction collusion — that’s just wrong, if the allegations are true. On the IDB thing, it’s important to remember what service market makers are providing and what risks they face. They are REQUIRED to make a market. They don’t have the buy-side’s luxury of buying or selling when they want to — they are required to take the other side. The bid-offer compensates not just for the use of balance sheet, but also for the risk of information asymmetry when facing the buy side. To me, that means an IDB market should… Read more »
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