WASHINGTON -- The Treasury Department told House lawmakers that any large position reporting rule it adopts for the goverment securities market would largely affect primary dealers.

In an Oct. 18 letter to Rep. Edward Markey, D-Mass., Frank Newman, Treasury undersecretary for domestic finance, said a reporting rule would most likely apply only when market participants have a position "in the billions of dollars. Consequently, very few entities would have to submit reports."

Treasury officials do not believe a rule would drive away market participants, as suggested by the Federal Reserve Board, said Newman. He said that "very few non-dealers would be affected," and he noted that the primary dealers already file daily trading reports with the New York Fed.

Newman pledged that Treasury will be "very cautious in exercising large position reporting authority and any related recordkeeping requirements."

The goverment securities bill passed by the House contains a provision giving the Treasury authority to adopt a large position reporting rule. Federal Reserve Board officials oppose the idea, while the Federal Reserve Bank of New York and the Securities and Exchange ComCommission are supportive. The Senate-passed bill contains no reporting rule.

"The Treasury Department continues to support large position reporting authority," Newman said. "Granting the Treasury Department this authority would demonstrate to the market the seriousness with which the federal government views manipulation of the goverment securities market."

The principal reason for adopting a rule would be to enable government regulators to watch for "significant price distortions for particular securities," Newman said. The Treasury has a policy of being prepared to reopen an issue if it determines there may be a market squeeze to drive up prices.

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