International Organization of Securities Commissions Seeks Feedback on Reports on Corporate Bond Markets and Regulation of Exchange Traded Funds

The International Organization of Securities Commissions is seeking feedback on two IOSCO reports: the first on drivers of liquidity in corporate bond markets during COVID-19 induced market stresses and the second on good practices for the regulation of exchange traded funds.

The first report discusses the global corporate bond markets and the causes of the liquidity crisis that emerged in March 2020 in response to COVID-19. IOSCO is seeking input from participants on its analysis of the crisis and on ways to improve market functioning and liquidity provision in corporate bond markets. Potential options include greater use of "all-to-all" trading (whereby all market participants can trade anonymously with each other irrespective of firm type) and reducing friction in bond markets (e.g., by improving price transparency in corporate bond markets and increasing standardization of bonds) which may in turn encourage the wider use of all-to-all trading. IOSCO also seeks input on ways to improve the quantity, quality and availability of public and private data. Comments should be submitted before June 30, 2022.

The second report discusses the global ETF market and IOSCO's proposed 11 good practices for regulators, responsible entities and/or trading venues. The good practices are intended to supplement IOSCO's existing 2013 Principles for the Regulation of Exchange Traded Funds and include: (i) measures to promote effective product structuring, which may include considering regulatory requirements on transparency and provision of information to the market as well as whether potential conflicts of interests raised by ETFs are adequately addressed by securities laws and exchange rules; (ii) measures to enhance disclosure, such as whether requirements are in place to ensure certain disclosures are presented in an understandable manner and whether the disclosure of fees and expenses for investing in ETFs enables investors to make informed decisions; (iii) measures to facilitate liquidity provision, including monitoring secondary market trading and establishing rules to govern the orderly trading of ETF shares; and (iv) appropriate use of volatility control mechanisms applicable to ETFs. Comments should be submitted on or before July 6, 2022.

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