Statement on FINRA’s Corporate Bond New Issue Reference Data Proposal

A foundational aspect of a fair, orderly, and efficient market is that all market participants have access to the basic reference data necessary to identify, value, and trade available securities and settle effectuated transactions. In many securities markets, the ability to obtain reference data is taken for granted. But, in the corporate bond market, where thousands of new issues come to market each year, many market participants do not have access to such information at the time a new issue begins secondary trading. Market participants that lack access to this data are hindered from timely participation, not only placing them at a competitive disadvantage but also adversely impacting liquidity in the particular bond issue on the first day the bond trades. Clearly, there is a need for basic reference data on new corporate bond issues to be impartially available to all market participants in a timely manner.

Furthermore, the process to collect reference data can be manual and not reflective of current technological capabilities. Many market participants and data vendors have stated that currently they may need to source corporate bond reference data through emails from underwriters or issuers as well as from deal documents or prospectuses. Despite the vast technological advancements our markets have experienced in recent years, there is currently no systematic method for providing impartial access to this basic information.

The Fixed Income Market Structure Advisory Committee (“FIMSAC”) recognized the need for improvement in this area and identified it as worthy of regulatory action. In 2018, the FIMSAC recommended that the SEC, in conjunction with FINRA, establish a new issue data service for the provision of corporate bond reference data to all market participants.[1] The FIMSAC stated that “common access to timely and accurate corporate bond reference data would increase the efficiency and interoperability of the corporate bond market and promote fair competition among all market participants.”[2] The recommendation, which was adopted unanimously, was the subject of deliberation at both a public meeting as well as at meetings of the Technology and Electronic Trading Subcommittee, and included feedback from a cross-section of market participants.

Subsequent to FIMSAC’s recommendation, in March 2019 FINRA filed a proposed rule change to create a New Issue Reference Data Service.[3] The proposal requires underwriters to report to FINRA certain reference data prior to the first trade in a corporate bond new issue. FINRA would disseminate this reference data immediately upon receipt.

The Commission today voted to approve FINRA’s proposed rule change and facilitate the ability of all market participants to have timely access to basic corporate bond reference data. I am grateful to FINRA for proposing to create the New Issue Reference Data Service and look forward to its next steps.

I believe it will help address an inefficiency in the corporate bond market, improve secondary market liquidity, and promote competition among data vendors and market participants. Data vendors, if they so choose, will all be able to access, at the same time, a minimum set of terms and conditions information upon which they can build the more enhanced products and services their clients demand. Trading venues likewise will be able to access the minimum data elements necessary to make a corporate bond available for trading at the time secondary trading begins. These developments should also serve to facilitate greater competition amongst intermediaries who will be able to participate to a greater extent in the corporate bond market at the time a bond may be most liquid.

My thanks to the FIMSAC members for highlighting this issue for attention and for their years of service. Thank you as well to the staff in the Division of Trading and Markets and Division of Economic and Risk Analysis for your work on the order.

It is my hope that improving the availability and timeliness of corporate bond reference data will enhance the corporate bond market’s foundation, thereby assisting the Commission in its efforts to pursue initiatives to advance its transparency, efficiency, and resiliency.