Treasury/Federal Reserve Study of Treasury Futures Markets Volume I: Summary and Recommendations

The September 30, 1978 legislation (P.L. 95-405), which renewed the authority of the CFTC to regulate futures markets, directs the Commission to solicit the advice of the Treasury and the Federal Reserve before authorizing any additional futures contracts that specify delivery of U.S. Government securities. The Act also requires the Commission to consider the impact of such futures trading on the debt management requirements of the Treasury and on the efficiency and the integrity of the market for U.S. Government securities. Confronted with the need to comment on several pending contract proposals, yet lacking a body of research on which opinions could be firmly grounded, the Secretary of the Treasury and the Chairman of the Board of Governors wrote the CFTC in October 1978, suggesting an immediate Treasury-FRB study and requesting a moratorium on new authorizations of Treasury futures contracts until the study could be completed. The Treasury and Federal Reserve staffs have since conducted over thirty interviews with a wide variety of participants in the cash and futures markets for Government securities. The findings from these interviews, as well as a summary of the costs and benefits of Treasury futures markets are summarized in this report. The detailed findings are provided in Volume II.