SIFMA, in a comment letter filed today with the Financial Industry Regulatory Authority (FINRA) and the Municipal Securities Rulemaking Board (MSRB) on their revised proposals for retail confirmation disclosure of reference prices on certain fixed income securities, expressed its strong support for efforts to enhance bond market price transparency in a way that provides retail investors with useful, clear, and consistent insight into their transactions. SIFMA also notes its concern that the proposed approach lacks coordination and that any new confirmation disclosure requirement should be uniform in design and operation, as there is no policy justification for adopting divergent approaches or terminology between regulators in this context, and urges FINRA and the MSRB to embrace a uniform or harmonized approach to potential rulemaking.
In its letter, SIFMA reiterates its previous comments that retail investors would be better served by a disclosure regime that focuses primarily on encouraging increased use of TRACE and EMMA, which provide customers a full picture of the market. SIFMA also reiterates its belief that any reference price disclosure requirement should be limited to riskless principal transactions involving retail customers.
Should the final rules broaden the scope of relevant transactions, SIFMA outlines its support for a two-hour time frame as the framework for the requirement as opposed the same-day window. A two-hour window, as proposed by the MSRB, would capture nearly all of the relevant universe of firm and customer trades and is a more reasonable proxy for contemporaneous trade disclosure than the same-day window proposed by FINRA. As the time period between firm and customer trades increases, any disclosure requirement becomes considerably more complex for dealers to implement and, given the difficulty of matching trades in complex scenarios separated by time, price fluctuations and market volatility, more difficult for customers to understand.
In addition, SIFMA urges FINRA and the MSRB to permit flexibility among a few methodologies for determination of the reference price including matching, prevailing market price and other readily determinable price references such as daily volume weighted average (market) price.
Finally, SIFMA highlights the need for a significant implementation time, given that the Proposals would require a fundamental reorientation of firm infrastructure and technology at enormous cost to the industry.
The comment letter is available at the following link:http://www.sifma.org/issues/item.aspx?id=8589957983