U.S. Government Securities:

An Examination of Views Expressed About Access to Brokers' Services

GGD-88-8: Published: Dec 18, 1987. Publicly Released: Dec 18, 1987.

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Pursuant to a legislative mandate, GAO examined the methods secondary market brokers use in deciding to limit access to certain firms, focusing on interdealer brokers' blind trading, limited access systems.

GAO found that, relative to retail brokers, interdealer brokers: (1) less frequently accept the risks associated with a customer failure; (2) serve a smaller number of customers; (3) provide more complete coverage of the range of government securities; and (4) more frequently restrict information access. GAO also found that current proposals for the expansion of trading access: (1) could create uncertainties regarding the oversight needed to control risks and financial responsibility in the event of losses; (2) would achieve only modest gains in efficiency, liquidity, and equity; and (3) would assign federal reserve banks an operating role in maintaining private sector trading systems. In addition, GAO found that wider dissemination of interdealer information: (1) would not introduce additional risk to the market's safety; and (2) could contribute to greater efficiency and equity in the secondary market. GAO plans further study on these issues and the need for federal intervention.

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