IOSCO seeks public comment on its analysis of liquidity in corporate bond markets

The Board of the International Organization of Securities Commissions (IOSCO) is seeking public comment on its consultation report entitled Examination of Liquidity of the Secondary Corporate Bond Markets, which was published today. IOSCO undertook this work in response to the concerns of some market participants about liquidity in this important sector.

As described in the consultation report, IOSCO did not find substantial evidence showing that liquidity in secondary corporate bond markets has deteriorated markedly from historic norms for non-crisis periods.

IOSCO also notes in the report that there is no reliable evidence that regulatory reforms have caused a substantial decline in market liquidity, although regulators continue to monitor closely the impact of regulatory reforms.

Furthermore, IOSCO’s study revealed meaningful changes to the characteristics and structure of secondary corporate bond markets, including changing dealer inventory levels, increased use of technology and electronic trading venues, and changes in the role of participants and execution models (i.e., dealers shifting from a principal model to an agency model).

The conclusions in the consultation report are based on a detailed analysis of liquidity metrics, survey results from industry and regulators, roundtables with industry, and a review of academic, government and other research articles.

The analysis of this information allowed IOSCO to develop an informed picture of current secondary bond market liquidity, although the analysis of the data collected by member jurisdictions was challenging because of differences in data collection methods, scope, quality and consistency. Because of these challenges, IOSCO expects to undertake in the coming months a study of data reporting and public disclosure requirements regarding the corporate bond markets.

IOSCO encourages the public to comment on the analysis, data and conclusions in this consultation report.

It also requests that market participants provide data relating to liquidity in the secondary corporate bond markets that could assist IOSCO in refining its analysis further.

Comments on the report should be submitted on or before 30 September.

The IOSCO statement and the report “CR01/2016 Examination of Liquidity of the Secondary Corporate Bond Markets” can be found here.

Lavanya Rathnam

Lavanya Rathnam is an experienced technology, finance, and compliance writer. She combines her keen understanding of regulatory frameworks and industry best practices with exemplary writing skills to communicate complex concepts of Governance, Risk, and Compliance (GRC) in clear and accessible language. Lavanya specializes in creating informative and engaging content that educates and empowers readers to make informed decisions. She also works with different companies in the Web 3.0, blockchain, fintech, and EV industries to assess their products’ compliance with evolving regulations and standards.

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