April 27, 2022

Chair Gensler and the Bond Market

Over seven years ago, I wrote an article for The Corporate Counsel titled “Still Your Father’s Oldsmobile: The SEC’s Recent Focus on the Corporate Bond Market,” which recounted statements from former SEC Chair Mary Jo White and former Commissioner Dan Gallagher regarding the need for more transparency and the utilization of electronic platforms in bond markets. Now those issues have resurfaced in a speech that Chair Gary Gensler recently delivered to London City Week.

Gensler may have had an Aston Martin in mind rather than an Oldsmobile, because he started off his remarks with a discussion of James Bond, noting that this year marks the 60th anniversary of the first James Bond film. Carrying through the “bond” theme, Gensler noted the sheer size of U.S. bond markets and returned to some key bond market themes from years ago – transparency, platforms and resiliency.

On the topic of platforms, Gensler noted it is important that SEC consider revising its rules to reflect the increased use of electronic trading platforms in fixed income markets. Gensler has asked the Staff to consider how the Commission might enhance market integrity, access, and pre-trade transparency on these platforms. He noted that, in January, the Commission proposed a new definition for “exchange” that would cover additional fixed income platforms and some systems that bring together buyers and sellers for other securities asset classes. Gensler noted:

In addition, I’ve asked staff to consider ways to increase fair access to electronic trading platforms that would fall within the expanded definition of “exchange,” with the goal of making the benefits of these systems more widely available to investors. I think we have an opportunity to augment investor protections and market integrity as well.

Given the size and importance of fixed-income markets, improvements to transparency, platforms and resiliency for bond trading could potentially be a rare bipartisan issue that the Commission can rally around.

– Dave Lynn