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AIMD-94-165R 1 (1994-08-25)

handle is hein.gao/gaobackql0001 and id is 1 raw text is: btt3o United States GAO General Accounting Office Washington, D.C. 20548 Accounting and Information Management Division B-258225 August 25, 1994 The Honorable Edward J. Markey Chairman, Subcommittee on Telecommunications and Finance Committee on Energy and Commerce House of Representatives Dear Mr. Chairman: In your January 26, 1994, letter, you asked us to obtain information on (1) what the Department of the Treasury is doing to reduce the average 1-hour period between the close of auctions and announcement of results and (2) whether Treasury could expect to receive higher prices for its securities by reducing this time. In addition, you asked us to obtain auction participants' views on the effect that reducing auction processing time would have on their hedging strategies and on the secondary market for Treasury securities. In summary, Treasury has reduced auction processing time from 1 hour to 45 minutes since our last report on the auction process in April 1993.2 However, in making further time reductions, Treasury is proceeding with caution to guarantee that its goal of ensuring accurate results is not jeopardized. We found no evidence that proves or disproves whether Treasury could expect to receive higher prices for its securities through a faster auction. To determine what Treasury is doing to reduce processing time, we documented the current auction process by observing ' Hedging refers to minimizing the risk of loss on a financial instrument, such as a Treasury security, due to a downward movement in price. It is done by taking a position in a financial instrument, such as an option or a futures contract, whose price moves in the opposite direction of the Treasury security. 2 Treasury Automation: Automated Auction System May Not Achieve Benefits or Operate Properly (GAO/IMTEC-93-28, April 27, 1993). GAO/AIMD-94-165R Treasury Securities Auction

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