A. firm acknowledged that it had submitted

The secondary market for Treasury securities consists of a
network of dealers, brokers, and investors who effect transactions either by
telephone or electronically. Telephone trades are generally between dealers and
their customers. Electronic trading is arranged through screen-based systems
provided by some of the dealers to their customers. It allows selected trades to
take place without a conversation. When dealers trade with each other, they
generally use brokers. Brokers provide information on screens, but the final
trades are made by telephone.

market was essentially unregulated until 1986, when the Government Securities
Act (GSA) introduced regulation setting financial responsibility and custody
rules for brokers and dealers in government securities. The rules were designed
to preserve the efficiency of the market and to encourage wide participation.
The oversight authority given to the Treasury under the GSA expired in October
1991. Before measures were taken to renew that authority, however, some
significant developments triggered intense scrutiny of the market for government
securities. In August of that year, Salomon Brothers, a large securities
dealer, disclosed that it had discovered irregularities in connection with
certain Treasury auctions. In that and in subsequent announcements, the firm
acknowledged that it had submitted unauthorized customer bids in Treasury
auctions during 1990 and 1991. In certain instances, these actions resulted in
Salomon Brothers’ is being awarded more than 35 percent of the auction amount,
a violation of auction rules.

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this atmosphere, various administrative and regulatory reforms were approved to
address a broad range of issues that arose from these events. These reforms
included steps aimed at broadening participation in auctions, stronger enforcement
of auction rules, more formal surveillance of the Treasury market, changes to
Treasury auction policies, and modifications of requirements for primary