SIFMA Testimony at House Subcommittee Fixed Income Market Structure Hearing

Washington, DC, July 14, 2017 – Today, Randy Snook, Executive Vice President at SIFMA, testified before the House Committee on Financial Services Subcommittee on Capital Markets, Securities, and Investment  in a hearing entitled “A Review of Fixed Income Market Structure,” with the full written testimony submitted for the record.

Remarks as prepared for delivery:
Chairman Huizenga, Ranking Member Maloney, and distinguished members of the Subcommittee, thank you for providing me the opportunity to testify today on behalf of SIFMA and to share our views on the structure and health of the U.S. fixed income securities markets.  The U.S. fixed income markets are truly without parallel with total outstanding debt of nearly $40 trillion dollars. On average $775 billion of securities are traded each and every day. As the trade association representing a broad range of financial services firms active in all aspects of the fixed income markets, SIFMA is dedicated to promoting investor opportunity, access to capital, and an efficient market system that stimulates economic growth and job creation.

Traditional bank lending is often pointed to by policymakers as the driver of economic growth but we are here to highlight the more significant source of financing that drives our economy—our capital markets. Bonds finance everything from home mortgages and car loans to highways and schools to factories and equipment as well as the federal government itself. The bond markets set interest rates for commercial and consumer lending and provide a safe and predictable investment for millions of Americans.

The cumulative impact of post-crisis reforms must be studied and reconsidered to ensure that our capital markets are providing funding in the most efficient way possible.  This is particularly important since private credit extended to households and nonfinancial businesses has grown at a slower pace than in all recoveries in the past 60 years.

SIFMA supports many of the post-crisis capital reform efforts and believes they have enhanced the overall resiliency of the capital markets. However, now is the time to review how these rules work together with a particular emphasis on determining where they may be impeding liquidity by targeting the same risk in multiple ways.

A review should include the new liquidity and leverage requirements but also look at the effects of and interactions with CCAR, Basel III capital rules, and single counterparty credit limits.

We firmly believe this sort of clear review of the potential costs of current and additional requirements which could limit the capital available for lending should be undertaken and are pleased that policymakers have begun to move in that direction.

When trying to understand the current state of liquidity, it is helpful to gather investor views. In 2014 and 2015 surveys of corporate bond investors, Greenwich Associates asked about the ease of trading corporate bonds by size.  In each year of the survey, over 75% of investors found it “difficult” or “extremely difficult” to trade larger-size blocks of corporate bonds measured as $15 million or larger.

Regulation does indeed affect liquidity. For example, the Volcker Rule limits on trading by banks in some cases constrain dealers’ ability to take on trading positions and build inventory necessary for market making. Capital and leverage rules also limit dealers’ ability to finance positions held in inventory, and can clearly limit their ability to commit to customer trades.

Although just one of the markets to be discussed this morning, the importance of the U.S. Treasury market to our economy cannot be overstated.  This unique, resilient, and robust market serves multiple roles including as the transmission mechanism for monetary policy, as a safe-haven investment particularly during times of financial stress, and, most importantly, as the source of stable and efficient funding for the Federal government.

Given its importance, continued study of any potential changes is required to ensure that the Treasury market remains the preeminent benchmark. Any changes to regulation should be carefully calibrated to support both the resiliency and the role of the Treasury market and recognize the unique structure and auction process that has allowed the Treasury to finance government activity at a low cost to taxpayers.

We support the government’s program to collect secondary market transaction data which began this week.  Additional changes, however, including public dissemination of that data, need further careful study, including a clear articulation of any potential benefits to the market, to ensure no harm.

In conclusion, SIFMA believes that policymakers have the ability to enhance economic activity through tailored recalibration of regulations affecting our capital markets. This recalibration could help jumpstart the economy without sacrificing financial stability. We appreciate the opportunity to present our views and we look forward to working with policymakers to help ensure that the capital markets continue to perform their vital functions and operate safely and efficiently to move America forward.  I look forward to answering your questions.


SIFMA is the voice of the U.S. securities industry. We represent the broker-dealers, banks and asset managers whose nearly 1 million employees provide access to the capital markets, raising over $2.5 trillion for businesses and municipalities in the U.S., serving clients with over $18.5 trillion in assets and managing more than $67 trillion in assets for individual and institutional clients including mutual funds and retirement plans. 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