On April 23, 2015, the Ontario
Securities Commission (OSC) released its report on the Canadian fixed
income market and published OSC Staff Notice 21-708
– OSC Staff Report on the Canadian Fixed Income Market and
Next Steps to Enhance Regulation and Transparency of Fixed Income
The Canadian Fixed Income Market Report represents the first
phase of the OSC's review of the fixed income market which is
focused on corporate bonds. The report draws four broad
conclusions. First, the limited and fragmented nature of data
available on the fixed income market makes it challenging to
conduct a comprehensive assessment. The OSC also observed that
large investors have more information and bargaining power than
small investors. The third key insight of the report is that there
has been limited adoption of electronic trading and alternative
trading systems, especially with respect to corporate bonds.
Finally, direct retail participation is low – retail
investors typically access the fixed income market through
OSC Staff Notice 21-708 provides insight into how the OSC
intends to move forward from the conclusions it reached in its
report. In this respect, the OSC has three goals. First, it intends
to facilitate more informed decision making among all market
participants. OSC Staff are currently reviewing whether the
transparency framework set forth in NI 21-101 Marketplace Operation
and the level of post-trade transparency is sufficient. In the
coming year, OSC staff intend to monitor the implementation of new
cost and performance reporting rules in NI 31-103 Registration
Requirements, Exemptions and Ongoing Registrant Obligations and to
work with the CSA to facilitate finding documents relevant to fixed
income offerings on SEDAR.
Second, the OSC intends to enhance market integrity by
overseeing the implementation of the recently adopted IIROC Rule
2800C as it is phased in. IIROC Rule 2800CTransaction Reporting for Debt Securities requires
reporting of fixed income product trade information by dealers. The
OSC also intends to analyze debt transaction data on a going
forward basis to assist in policy formulation.
Finally, the OSC intends to evaluate whether access to the debt
market is fair and equitable. OSC staff intend to work with IIROC
to better understand how investment dealers allocate new fixed
income issues as they consider whether a regulatory response is
necessary to concerns by smaller market participants about their
ability to participate in new fixed income issues.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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