Regulators to lift the veil on bond pricing

par Andrew Rickard | April 26 2016 01:27PM

The Canadian Securities Administrators (CSA) have outlined how they plan to improve transparency in the fixed income market.

In a Staff Notice 21-317, which was released last week, the CSA outlined their plans to improve oversight of the fixed income market. In particular, regulators say they want to facilitate more informed decision making among investors, improve market integrity, and evaluate whether access to the fixed income market is fair and equitable for all investors.

Improved price transparency

Improved price transparency is a central component of the CSA's plans for the bond market. The regulator has decided to make the Investment Industry Regulatory Organization of Canada (IIROC) responsible for disseminating post-trade information about corporate debt securities.

By the end of this year, IIROC will reveal post-trade information for all trades in designated debt securities and for retail trades in all other corporate debt securities two days after the transaction date (T+2). Next year, IIROC will expand the dissemination of information to trades in all corporate debt securities.

Subject to volume caps

This bond pricing data will be made available for free on a public web site, although the information will be subject to volume caps which will mask the true value of large-sized trades. The CSA says that the volumes of trades for investment-grade corporate bonds with volumes over $2 million will be shown as "$2 million+", while the volumes of trades for non-investment-grade corporate bonds with volumes over $200,000 will be shown as "$200,000+"

Fixed income trading activity

"The CSA and IIROC will review the fixed income trading activity, as well as the appropriateness of the initial dissemination delay and of the volume caps over time, with a view to decreasing the dissemination delay from T+2 where appropriate," reads the CSA notice. "Any changes in the initial dissemination delay of T+2, the volume caps or other aspects of the transparency framework will be carefully considered and subject to public consultation."