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Remarks at Meeting of the Fixed Income Market Structure Advisory Committee

Oct. 5, 2020

Thank you, Michael [Heaney], and thank you all for being “here” virtually. Recognizing that this very productive meeting is well underway, I will take just a few moments to share some thoughts. First, I would like to thank each of our Committee members for their tremendous efforts to further the work of this Committee, especially as we have all had to adapt to working in this new environment. Your contributions to the Commission have been significant and are continuing.

Second, I am pleased to welcome new members Darryl Street, Robin Foley and Ola Persson to the Committee. As you may know, Darryl Street is a Senior Financial Policy Advisor for the Government of the District of Columbia and represents the perspectives of a municipal securities issuer. Robin Foley is the CIO of Bonds at Fidelity Investments and represents the perspectives of an institutional investor. And Ola Persson is the Head of Transparency Services at FINRA, representing FINRA’s perspectives. Darryl, Robin and Ola, welcome to the Committee. We look forward to working with you and benefiting from your experience and insights.

Third, I continue to be impressed with the breadth and depth of the issues the Committee has raised and the recommendations you have provided for consideration by the Commission and FINRA. I believe this is a product of the diversity of experience, candor and commitment of the individuals who have given their valuable time to the Committee. The Committee includes individuals representing a range of perspectives on the fixed income markets, and to demonstrate, let me note here that the list includes retail and institutional investors, corporate and municipal issuers, trading venues, bank and non-bank affiliated institutional dealers, a retail dealer, a regional municipal securities dealer, a proprietary trading firm, a data provider, academics, and self-regulatory organizations. It is precisely this diversity, and your collective expertise, that makes the Committee a valuable resource. And despite the potential challenges associated with incorporating diverse viewpoints and reaching consensus on difficult issues, you have succeeded in making 16 recommendations to the Commission over the course of 11 public meetings since the Committee was established in 2017. I had high expectations for this Committee when I began my tenure and decided we needed to hear from fixed income market experts, and you all have exceeded even my highest hopes. Here, a special thank you to Michael Heaney for his leadership which promoted collegiality, rigor and productivity.

Fourth, I would like to highlight just some of the many recent events that have benefited from your past efforts. Last week, as part of its proposal to extend Regulations ATS and SCI to Treasuries and government securities markets, the Commission issued a concept release on the electronic corporate bond and municipal securities market. Over the past few years, the Committee has raised many important issues and provided recommendations concerning the regulatory framework for electronic trading, including the recommendation under consideration today, which I will return to in a moment. In the concept release, drawing on this Committee’s recommendations, the Commission solicited public comment on a range of issues that will help inform our future policy concerning this critical aspect of our fixed income market structure. Additionally, FINRA recently issued regulatory notices related to Committee recommendations regarding “pennying” and TRACE reporting for certain corporate bond trades. Specifically, in August, FINRA issued a regulatory notice regarding pennying that describes its data analysis of the practice in the corporate bond market and solicits comment on that analysis and on the practice generally. And in July, FINRA published a regulatory notice requesting comment regarding your recommendation concerning the identification of certain types of corporate bond trades in TRACE.

Fifth, today, the Committee considered a recommendation from the Technology and Electronic Trading Subcommittee to improve our collective ability to better understand electronic trading volumes in our corporate bond and municipal securities markets. I understand and support the desire for enhanced transparency. Generally, markets and market participants benefit from accurate and consistent trading data, to find liquidity and make investment decisions. I appreciate the Committee’s attention to this important matter.

Finally, I am glad you are discussing how our fixed income markets performed in and since March. To date, our financial markets weathered volatility and uncertainty admirably, but we cannot rest. I view today as valuable opportunity to reflect on—and assess—our fixed income market structure in the midst of these unique circumstances.

I look forward to the rest of the discussion today and I hope you do not mind if I participate this afternoon. Thank you.

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