From the Regulators

The firm’s approval as an information processor for corporate debt securities was set to expire on Dec. 31, 2015

By James Langton |

With plans to bolster bond market transparency in the works, securities regulators have given debt reporting firm CanPX Inc. a six-month extension as an approved information processor.

The Canadian Securities Administrators (CSA) is extending CanPX's status as the information processor until June 30, according to a CSA notice issued Dec. 29, 2015.

The CSA is planning to expand transparency in the fixed income markets with the Investment Industry Regulatory Organization of Canada (IIROC) taking over as the "information processor" for bond market data, and eventually publishing trading data for all corporate bonds, subject to a delay in disseminating that data and caps on the volume reported. Initially, the major investment dealers will be required to report to IIROC later this year, with that requirement extending to all dealers in mid-2017.

See: Bringing sunshine to the bond market

The regulators are currently analyzing the comments received on their initial proposals, and that they expect to publish additional information about their plans in the first quarter of 2016, the CSA notice says.

CanPX has been an information processor for corporate debt securities since 2003, although its regulatory approval for that role was set to expire on Dec. 31, 2015. CanPX currently reports data on approximately 450 securities, subject to volume caps; and its data is disseminated hourly.

The Investment Industry Association of Canada (IIAC) has argued that CanPX should not be killed off by the CSA's plans for enhancing market transparency.

See: Keep CanPX: IIAC

In his latest industry letter, Ian Russell, IIAC president and CEO, notes that if CanPX loses its status as a regulated information processor, "dealer participation in CanPX will likely fade bringing with it an end to the CanPX corporate bond transparency service. This may also cause CanPX to shut down its government bond transparency service resulting in less transparency in government bond markets."

The IIAC has also expressed concern that the CSA's plan to mandate transparency for all bonds may ultimately undermine liquidity, particularly in securities that are already relatively illiquid, such as high yield issues.

Instead, the industry association argues that the "optimal approach" to improving bond market transparency, "would seem to be an amalgam of the proposed transparency approach based on the new IIROC surveillance system, and the existing CanPX transparency system." To that end, the IIAC proposes that CanPX should retain its status as an approved transparency system; and, suggests that it should continue to publish data on Canadian government securities and certain corporate securities, alongside the new IIROC reporting system.