The SEC’s Fixed Income Market Structure Advisory Committee conducted a virtual meeting today. The Committee considered several issues of interest including recommendations regarding pre-trade transparency and the TRACE Pilot.
The agenda can be viewed here.
Recommendation Concerning Pre-Trade Transparency in the Municipal Securities Market
The Committee unanimously approved a recommendation encouraging the SEC to further study the issue of pre-trade price transparency in the municipal market with an eye towards tailored rulemaking in this area.
The Recommendation can be viewed here.
The Subcommittee’s recommendation includes the following:
“We recommend that the Commission review developments in this [price transparency] area in the past decade, including the manner in which retail trades are executed, the roles played by market participants, including intermediaries and marketplaces, and the manner and breadth of information dissemination to retail investors. The subcommittee recommends that the Commission determine whether there are effective actions that can be taken by the Commission, MSRB or others to provide additional transparency for this vast market to the investing public.”
- The recommendation does not include a specific rule proposal.
Trace Pilot Proposal
The Committee had a discussion of the TRACE Pilot proposal. Recall that in 2019 the FIMSAC recommended certain changes to TRACE trade dissemination including withholding certain block trades from dissemination for 48 hours.
FINRA Block Pilot Comment Summary can be viewed here.
- FINRA formally proposed a rule change based on the FIMSAC’s recommendation, but public comment was overwhelmingly negative, and FINRA rejected the proposal.
- Today the FIMSAC discussed possibly revising the recommendation to address some of the public criticisms, but no decision was made.
Recommendation Regarding Internal Fund Crosses
The Committee unanimously approved a preliminary recommendation of the Technology and Electronic Trading Subcommittee to permit Registered Investment Advisors to conduct cross trades in corporate bonds involving mutual funds.
The Recommendation can be viewed here.
- Under current rules, RIAs are permitted to cross trades between customers subject to certain conditions;
- However, if one or both the RIA’s customers is a mutual fund, SEC rules impose significant additional restrictions;
- The proposal approved by the Committee would provide crossing rules for mutual funds that closely match the rules for other categories of investors.
Role of Bond Pricing
The committee also discussed issues related to possible conflicts of interest associated with issuers paying for bond ratings and conducted a discussion of the role of bond pricing services.
- The BondCliq presentation can be viewed here
