The US securities regulator on Wednesday said it would delay implementing a rule meant to bring transparency to corporate bond markets, bowing to fierce industry lobbying as banks and trading houses warned that enforcing the 51-year-old rule on fixed income could cause “significant, deleterious effect” on the market.
The Securities and Exchange Commission has postponed an amendment to ‘rule 15c2-11’ until January 4, 2025, giving broker dealers in the bond market two more years to prepare themselves.
The statute, first implemented in 1971, requires dealers to check that a wide range of financial information is up to date on each company for which they quote prices. In 2020, the SEC amended the rule, requiring dealers to ensure the details they were checking were publicly available to investors.
Many market participants had assumed that the rule and its amendment related only to equity trading. But they had never explicitly excluded bonds — and‘last year the SEC decided that the rule would apply additionally to fixed income, setting off a scramble among bankers and trading platforms to get ready for a dramatic shift in required disclosures.
The Securities Industry and Financial Markets Association said on Wednesday it was “pleased the SEC has recognised the potential harm” that US companies and investors would have endured from the application of the public disclosure requirements of Rule 15c2-11 to the 144A market. The 144A market allows issuers to raise capital from qualified institutional investors, such as pension funds, without having to register their securities publicly with the SEC. It has grown rapidly in size in recent years.
Still, “we note that the relief is not permanent,” said Kenneth E. Bentsen, Jr, president and chief executive of Sifma.
“We continue to believe that if the SEC wishes to apply this rule, which was designed for equity markets, to the fixed income markets, it should do so through a public and deliberative proceeding via Commission rulemaking.”
