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IOSCO did not find substantial evidence showing that liquidity in secondary corporate bond markets has deteriorated markedly from historic norms for non-crisis periods. IOSCO also notes in the report that there is no reliable evidence that regulatory reforms have caused a substantial decline in market liquidity, although regulators continue to monitor closely the impact of regulatory reforms.
Furthermore, IOSCO’s study revealed meaningful changes to the characteristics and structure of secondary corporate bond markets, including changing dealer inventory levels, increased use of technology and electronic trading venues, and changes in the role of participants and execution models (i.e., dealers shifting from a principal model to an agency model).
The conclusions in the consultation report are based on a detailed analysis of liquidity metrics, survey results from industry and regulators, roundtables with industry, and a review of academic, government and other research articles. The analysis of this information allowed IOSCO to develop an informed picture of current secondary bond market liquidity, although the analysis of the data collected by member jurisdictions was challenging because of differences in data collection methods, scope, quality and consistency. Because of these challenges, IOSCO expects to undertake in the coming months a study of data reporting and public disclosure requirements regarding the corporate bond markets.
IOSCO encourages the public to comment on the analysis, data and conclusions in this consultation report. It also requests that market participants provide data relating to liquidity in the secondary corporate bond markets that could assist IOSCO in refining its analysis further.
Comments on the report should be submitted on or before 30 September.