Tags: SEC | Gallagher | bond | risk

SEC's Gallagher Urges Standardized Bond Offerings to Reduce Risk

Tuesday, 16 Sep 2014 01:01 PM

Corporate-debt issuances should be standardized by regulators as a way to promote more centralized trading of bonds, U.S. Securities and Exchange Commission member Daniel M. Gallagher said Tuesday.

Regulators and market participants should reduce the share of bond offerings that are “highly differential and bespoke,” Gallagher said in a speech at a financial markets conference in Washington. The SEC may need to alter some of its own rules, including removing registration requirements, to ease the process, he said.

Standardization would allow more trading to occur on exchanges and other electronic venues, and would help stabilize markets in periods when investors rush to sell bonds, Gallagher said. The risk posed by investors trying to dump bonds after the Federal Reserve raises interest rates is “percolating right under” the noses of regulators, he said.

“We can address liquidity risks by facilitating electronic dealer-to-dealer and on-exchange transactions of these products,” he said at the Georgetown University conference. “Such changes in the secondary market can only happen, however, if the commission commits the necessary resources to incentivize standardized primary offerings.”

The Financial Stability Oversight Council, the panel of regulators responsible for monitoring systemic risk, should be more focused on links between the Fed’s interest-rate policy and risk building up in the fixed-income markets, he said.

Gallagher acknowledged that major changes to the bond market, where transactions have traditionally occurred over the telephone, are no “small task.” Failing to move ahead risks “waiting for Congress to react to a crisis and mandating through legislation that all corporate bonds be executed on exchange platforms,” he said.

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Corporate-debt issuances should be standardized by regulators as a way to promote more centralized trading of bonds, U.S. Securities and Exchange Commission member Daniel M. Gallagher said.
SEC, Gallagher, bond, risk
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2014-01-16
Tuesday, 16 Sep 2014 01:01 PM
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