From the Regulators

Regulators propose making corporate debt trading publicly available

By James Langton |

The Canadian Securities Administrators (CSA) on Thursday announced several proposals to bolster transparency in Canadian fixed-income markets, including a plan to have all corporate debt trading data made public by the end of 2017.

The regulators are proposing that "trade information for all corporate debt securities executed by dealers be made publicly available, subject to delayed dissemination and volume caps, by the end of 2017," a CSA staff notice explains.

To that end, the CSA has decided to designate the Investment Industry Regulatory Organization of Canada (IIROC) as the information processor for debt trading data. And, as the CSA introduces public reporting of this data over the next couple of years, IIROC will collect, process, and publicly disseminate trade information.

Designating IIROC as the information processor allows the CRA to leverage the reporting platform that IIROC has already built to collect trade data from its members, the staff notice says. Starting in November, IIROC is implementing its own new debt reporting regime in order to enhance regulatory oversight of that market.

Using IIROC to also make that data public, will "… ensure that a source of historical information for trades in all corporate debt securities is in place, and that market participants report their trade information to a single entity for both regulatory and transparency purposes," the staff notice says.

"Ensuring fixed income data is available to regulators and enhancing corporate debt transparency are significant steps in modernizing the regulatory framework for the fixed income market," said Louis Morisset, chair of the CSA and president and CEO of the Autorité des marchés financiers (AMF), in a statement. "The CSA's plan covers these key areas and lays the groundwork for future policy work."

Under the CSA's proposal, the data will not be reported to the public in real-time, as it is only reported to IIROC one day after the trade. As well, public reporting will likely be two days after the trade "in order to give IIROC the time needed to process the information," the staff notice indicates.

The exact timing of public data dissemination will be announced before the end of 2015, the staff notices says, along with the specific data that will be reported by IIROC, and details regarding the availability of the data. The information to be published by IIROC will also be subject to volume caps, in order to protect the anonymity of large trades.

The plan calls for IIROC to start disseminating post-trade information for all trades in certain corporate debt securities, and for retail trades for all other corporate debt securities, by mid-2016, and to begin disseminating information for all trades in all corporate debt securities and for new issues of corporate debt by mid-2017. The specific implementation dates for these two phases will be confirmed by the end of 2015, the staff notice says.

"As a public interest regulator, IIROC is pleased that the comprehensive data we collect will be used by the CSA as we work together to improve oversight of the fixed income market and market integrity," said IIROC president and CEO, Andrew Kriegler, in a statement. "Investors will benefit from the greater efficiency and increased transparency resulting from this initiative."

In addition, the CSA is considering whether to require exempt market dealers (EMDs) to report fixed income trading data to IIROC as well, "so that IIROC can establish a comprehensive source of information that would include all relevant market participants," the staff notice says. As well, the CSA is examining whether transparency requirements should apply to that information. The regulators will report on the status of that review "in due course," the staff notice adds.

The CSA and IIROC have also formed a working group to look at the issue of market access. Smaller institutional investors complain that they have limited ability to participate in new debt offerings, the CSA staff notice notes, and a report by the Ontario Securities Commission (OSC) has found that underwriters do tend to focus their efforts on marketing bonds to large institutions for a variety of reasons. The joint CSA-IIROC working group plans to examine how dealers do allocate new issues; which will determine whether any regulatory action is needed in this area.

Comments on the CSA proposals are due by Nov. 1.