Fixed Income Market Structure

Fixed income markets are an integral component to economic growth, providing efficient, long term and cost-effective funding. They are also one of the most heavily regulated areas of the U.S. capital markets.

Key issues currently facing the fixed income markets include:

Treasury Market Structure

Recent events highlighted longer-term structural questions in the Treasury markets, particularly the growing mismatch between the volume of Treasury issuance and the capacity of the system to intermediate the trading of those instruments.

How Treasury market liquidity can be maintained, even during periods of stress, is the subject of significant study and debate.


Rule 15c2-11

The U.S. Securities and Exchange Commission announced through a staff no-action letter in December 2021 that it would begin applying Rule 15c2-11 to the fixed income markets. The Rule, which was implemented in 1971, amended in 1975, 1991, and again in 2020, is and always has been targeted at protecting retail investors from OTC equity market fraud and has never been enforced in fixed income markets. For these reasons, it was not designed with fixed income markets in mind.

SIFMA members, including our investor members whom the Rule is nominally purported to protect, strongly believe this rule is not needed in or appropriate for fixed income markets. If the SEC proceeds with this application, they must provide the opportunity for the public to receive notice and provide comment on the proposed application, given the material policy change it represents. Failure to take these steps would threaten the continued expansion of liquidity and transparency in these markets and may increase transaction costs, harming issuers, investors, and the broader economy that is served by fixed income markets. In particular, the SEC’s action threatens the Rule 144A securities markets, which are broad and important to the many issuers who raise capital in them.


Infrastructure and Municipal Finance

There is a clear pressing need to invest in our nation’s infrastructure. Municipal bonds finance the bridges, roads, schools and hospitals our communities rely on. We have an infrastructure spending shortfall and a critical need to address it. Further, there is a difference between funding and financing efforts.

SIFMA’s priorities in this space are effective financing tools with that have been used by over 50,000 state and local governments for key infrastructure projects.


Regulation ATS

The U.S. Securities and Exchange Commission has also proposed amendments to Regulation ATS under the Securities and Exchange Act of 1934 as they relate to government securities Alternative Trading Systems (ATS). SIFMA generally supports increased operational transparency related to the basic rules of operation of fixed income and government securities ATSs. There is value in operational transparency related to the basic rules of operation of the venue, the ability of priority or preferential treatment (if any) for certain desks or clients and information on risk controls. Among other things, more operational transparency would aid investors in conducting analysis of executions.

SIFMA supports tailoring Form ATS disclosures in a manner that addresses the unique characteristics of the fixed income and other marketplaces to best serve investors.

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