Pre-trade transparency targeted in corporate bond markets

Tuesday, August 15, 2017 - 00:42

[LONDON] Global securities regulator umbrella body IOSCO has recommended that its members seek more information on corporate bond trading, particularly on the specifics of the market before a trade is made, and how it is subsequently reported.

The International Organization of Securities Commissions (IOSCO) wants market participants to respond to seven recommendations by October 16.

Several are standard demands that regulators should have the power to obtain market information of a sufficiently transparent nature through required reporting.

However, IOSCO is also suggesting that "regulatory authorities should have access, either directly or upon request, to pre-trade information where it is available, relating to corporate bonds".

It says this "might include information other than firm bids and offers such as indications of interest". The implication is that such market colour provided to individual brokers could harm others seeking to deal.

It also wants authorities to "consider steps to enhance the public availability of appropriate pre-trade information relating to corporate bonds, taking into account the potential impact that pre-trade transparency may have on market liquidity".

Another recommendation seeks to brush up the post-trade regulatory requirements for the secondary market in corporate bonds.

"These requirements should be calibrated in a way that a high level of reporting is achieved," IOSCO said, and should include price, volume, time and buy/sell indications on each instrument.

It also recommends that such post-trade information is also made public as transparently as possible and also consolidated into data sets.

IOSCO said enhancing the information available publicly should support "the price discovery process and enable participants in the corporate bond markets to make more informed investment choices and better assess execution quality".

It was hopeful that "these improvements have the potential to attract additional liquidity from both new and existing participants".