SIFMA Proposes Simpler Pilot Test to Increase Block Trading Liquidity

New York, NY, June 11, 2019 – In a comment letter filed today, SIFMA expressed its ongoing support of the concept behind FINRA’s proposed pilot program to study recommended changes to corporate bond block trade dissemination, which is focused on increasing block trade liquidity.  However, SIFMA believes the FINRA proposal is too complex and should be simplified to increase its effectiveness.

“Our members indicate that block size transactions have become substantially more difficult to execute and counterparties are more frequently choosing to break up blocks into smaller transactions or delay transactions to avoid market frictions.  The resulting decline in block liquidity has harmed market participants,” said Chris Killian, managing director at SIFMA.  “By simplifying its proposal, FINRA would be more likely to obtain meaningful data, without unduly disadvantaging any given issuer or investor or adding excessive complexity to pricing or trading decisions.”

FINRA’s proposal would implement the SEC Fixed Income Market Structure Advisory Committee’s (FIMSAC) recommendation for a pilot program that would adjust the TRACE framework to test if changes would spur liquidity in block-size trades of corporate bonds.

 SIFMA’s broker-dealer members find the FINRA proposal—which lays out three test groups and a control group—to be too complex.  Traders and investors will need to reference which of the four groups a security is in and factor that information into both trading and pricing decisions accordingly. In practice this will mean simultaneously considering the impacts of four different disclosure regimes when pricing a bond, a complex and time-consuming process which will become even more so when groups of securities or portfolios are traded.  Because the pilot program would be a live test, there is a very real potential for creating winners and losers depending on in which bucket an issuer were slotted.  SIFMA is also concerned that this fragmentation of the market will make it more challenging for the pilot to elicit meaningful data.

SIFMA suggests that FINRA should take the time following the receipt of comments on this proposal to discuss and develop a revised proposal that is more palatable to a broader proportion of the corporate bond trading markets.  SIFMA members would be pleased to discuss in depth with FINRA the costs and benefits of various options that could be considered, as well as other more technical issues related to the implementation of a pilot.

At a minimum, the pilot would produce more meaningful results with at most one test group and one control group.  The primary benefit of this would be that there would only be two kinds of securities – those subject to the terms of the pilot and those in the control group – making the pilot simpler to implement and understand, and the treatment of bonds within or outside of the pilot more quickly and easily understood.  This should provide high quality data and have the benefit of being the easiest to manage for market participants.

SIFMA also believes that market participants should have access to information to be able to analyze the same research questions that FINRA discusses in the proposal.  In addition, SIFMA encourages FINRA to stay in close contact with market participants at all stages of the pilot.


SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate for legislation, regulation and business policy, affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit