On January 11, 2018, the Securities and Exchange Commission's (SEC) Fixed Income Market Structure Advisory Committee (FIMSAC) held its inaugural meeting. The SEC formed the FIMSAC to provide advice to the SEC on the efficiency and resiliency of the fixed income markets and identify opportunities for regulatory improvement.1 The FIMSAC is composed of a diverse group of outside experts, including individuals representing the views of retail and institutional investors, small and large issuers, trading venues, dealers, and self-regulatory organizations, among others.2 The agenda for the first meeting of the FIMSAC focused on the exploration of a variety of bond market liquidity issues.
In his opening remarks, SEC Chairman Clayton emphasized the significance of the fixed income markets to the US economy and the investing public and, accordingly, the importance of ensuring that the SEC's "regulatory approach to these markets is sound and continues to meet the needs of retail investors, as well as American companies and state and local governments."3 Chairman Clayton stated that the FIMSAC will play an important role in evaluating the SEC's regulatory efforts in the fixed income markets. Commissioner Piwowar applauded the decision to form the FIMSAC and challenged its members to take control of its agenda and use their collective expertise to inform the SEC of the issues that deserve the greatest attention.4 He noted that "fears of possible liquidity shocks persist, and greater depth of analysis is needed to understand what may be appropriate regulatory next steps." Commissioner Stein noted that the fixed income markets, which are vitally important to the US financial system, are "in a period of profound and multifaceted change" and that the FIMSAC will explore what these changes mean for the fixed income markets, including their effect on liquidity.5 Newly appointed Commissioners Jackson and Peirce similarly were supportive of the efforts of the FIMSAC. Finally, SEC Division of Trading and Markets Director Redfearn also supported the greater focus on the fixed income markets and indicated that he looks forward to evaluating the need for any regulatory or deregulatory efforts to enhance the efficiency of the fixed income markets.
Bond Market Liquidity Conditions Research
The first panel6 at the FIMSAC meeting explored research regarding the metrics for analyzing liquidity in the bond market and what these metrics mean for liquidity. The...