Chair White Seeks Transparency for the Fixed Income Markets
Two weeks ago, SEC Chair Mary Jo White announced plans aimed at improving the structure of U.S. equities markets. She discussed her proposals for promoting market stability and fairness, enhancing market transparency and disclosures, and building more effective markets for smaller companies. On Friday, she turned her attention to the fixed income markets.
White notes that in contrast to the equity markets, where many have voiced the concern that technology and competition have gone too far, investors in the fixed income markets have yet to experience the transformative power of technology.
In the fixed income markets, White fears, technology is being used simply to make the existing decentralized method of trading more efficient for market intermediaries without achieving more widespread benefits for investors. Those benefits include the broad availability of pre-trade pricing information, lower search costs, and greater price competition.
To remedy that concern, and to help assure that investors receive the best prices reasonably available, the SEC is working with the Municipal Securities Rulemaking Board to finalize a best execution rule for the municipal securities market. The Commission is also working with the MSRB and the Financial Industry Regulatory Authority to provide practical guidance on how brokers might effectively achieve best execution.
In addition, the SEC is working with FINRA and the MSRB in their efforts to develop rules by the end of this year regarding disclosure of markups in “riskless principal” transactions for both corporate and municipal bonds.
View the full text of White’s speech here.