IOSCO published several draft recommendations for increasing transparency and the availability of public information in the secondary corporate bond markets. The recommendations comprise an update to a previous report published by IOSCO in May 2004. The new recommendations build on an IOSCO study of corporate bond liquidity published earlier this year (see previous coverage). The consultation report, which is titled Regulatory Reporting and Public Transparency in the Secondary Corporate Bond Markets, emphasizes the importance of information collection for regulators tasked with monitoring the markets properly.

IOSCO presented the following recommendations for promoting transparency in the corporate bond markets:

  • The lack of consistent standards in regulatory reporting regimes and the differences between those regimes make regulatory monitoring difficult. Regulators should have the ability to acquire a "comprehensive understanding" of the market, including "characteristics of the market and the types of bonds traded."
  • Global initiatives and interactions make cross-border cooperation a necessary part of developing a comprehensive understanding of the markets. A clear framework and underlying methodology should be developed in order to facilitate this cross-border understanding.
  • Regulators should be able to access both firm and indicative pre-trade information.
  • Regulators should endeavor to increase the availability of pre-trade information to the public while taking into account potential increases in liquidity.
  • Regulators should institute post-trade reporting and transparency requirements that are tailored to the specific markets in order to ensure a "high level of reporting."
  • Regulators should take steps to consolidate reported post-trade data.

IOSCO asked market participants to provide comments on the proposed recommendations. Comments are due by October 16, 2017.

Commentary / Steven Lofchie

The big open question is this: what are the circumstances under which pre-trade or post-trade reporting to the public will diminish liquidity? Dealers may not want to give away their positions. Institutional customers are concerned about signaling their intent. The report does provide some discussion of these issues (see p. 12), but it does not reach any conclusions.

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