Treasury tech glitch botches Goldman's T-bill order

Pedestrians walk past the New York Federal Reserve building.
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The Treasury Department's web-based auction system joins a growing list of trading platforms in the past month to suffer a technology snafu, when a glitch prevented Goldman Sachs from receiving a multibillion-dollar order for T-bills last week.

The Treasury Automated Auction Processing System, TAAPS, experienced a technical difficulty Sept. 9 when the New York Fed was conducting the auction of $30 billion in three-month bills. Goldman Sachs' apparently was unable to place its order via the Web portal, so the order was attempted manually, but that failed.

The Treasury Bureau of Public Debt, in a Sept. 10 notice said the bidder, which it did not identify, was unable to receive the order and ended up being rewarded a larger sum of six-month bills instead. Those bills were in excess of the 35 percent rule for competitive bidders in Treasury auctions, but the Treasury decided it was in the best interest of the market to waive the rule and let the auction stand.

Goldman ended up with twice as many six-month bills as it wanted and no 3-month bonds.

As a result of the problem, the three-month bill auction appeared to have priced less than would be expected and sold at a higher yield of 0.02 percent, while similar bills were trading at a yield of 0.013 percent.

Goldman Sachs would not comment, and the New York Fed referred calls to Treasury which operates TAAPS. The Treasury's Sept. 10 notice said it had no further issues and continued to test the system. The Treasury had no further comment.

Other outages in the past month were far more public, including the three-hour trading halt at the Nasdaq Aug. 22, which prompted the SEC to call for an overhaul of procedures at the exchanges. This past week, trading across the options industry was halted when SIAC, owned by the NYSE, had to shutdown and restart systems that affect price data for the industry, after a weekend upgrade.

The issue with the Treasury system is unusual, and Goldman's multibillion-dollar order was not out of the ordinary.

Dow Jones, which first reported on the issue, said the technical failure is rare as investors and others familiar with the system reported no failures in the past decades or during the four debt auctions held since the Sept. 9 breakdown.

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