By Pia Hecher.
The Securities and Exchange Commission (SEC) Fixed Income Market Structure Advisory Committee (FIMSAC) has proposed that the SEC establish a new issue reference data service for corporate bonds. The service would include details about issuer and issue identifiers such as coupon, maturity, payment frequency, convertibility and call schedule among other things.
FIMSAC recommended that the managing underwriter of TRACE-eligible corporate bond new issues should transmit reference details and information about follow up adjustments to a FINRA-run database. Data should be sent at the same time as it becomes available to any other party not involved in the offering.
The primary market issuance process has long been an issue for asset managers, who struggle with a lack of standardised processes, data and an absence of transparency around allocation from dealers.
The electronification of primary market activity has been furthered by specialist Ipreo, which is which is expected to face competition from a platform being launched by a consortium of banks, Citi, Goldman Sachs, and Wells Fargo. Both platforms are attempting to reduce the level of error and inefficiency in the current model.
“FIMSAC’s recent recommendation underscores the need for more readily available and easily consumable data in the corporate new issue process,” says Bill Sherman, head of Global Markets Group at Ipreo. “Ipreo has active working solutions in this space that are already being utilised by numerous market participants across the world to accelerate this goal in a cost-effective manner for the benefit of the market.”
At present, underwriters and issuers active in the US corporate bond market are not obliged to share new issue reference data with a central depository. FIMSAC also identified a lack of automated means to distribute new issue data and of rules to ensure equal access to information.
A reference data service should mean fewer errors in trading and more competition among data sellers, investors and trading platforms according to FIMSAC. Following implementation, FIMSAC advised that the SEC include seasoned issues as well as information on corporate actions in the service.