Taxable Fixed Income Advocacy

Taxable
Fixed Income
Advocacy

Market Initiatives

Market Structure Working Group

The BDA has created a group to proactively address the challenges and opportunities that changing business practices, technology, regulation, and market forces have on fixed income management. The working group brings together a seasoned and diverse group of industry professionals focusing on all aspects of fixed income market structure with retail, institutional, taxable, and muni-focused participants.

As a ‘Main Street’ thought leader on fixed income market structure, the BDA’s new working group anticipates direct engagement with the SEC, Capitol Hill, federal regulators, and other market participants.

Topics of interest to the working group include:

Federal regulation and the impact on fixed income liquidity;
Technology, execution and the impact on trading and sales;
Electronic execution in the taxable primary markets; and
Evolving buy-side capabilities and expectations

View more information about this group - here

Advocacy

The BDA works passionately to promote public policies and practices that improve the fixed income market while also providing a forum for its members to debate and discuss issues of common interest. The BDA acts as a clearinghouse for industry information and provides educational opportunities for industry professionals through conferences, seminars, and roundtables.

Corporate Bond Syndicates - SEC Net Capital Rule mismatched with FINRA Corporate Syndicate Settlement Rule

BDA is pursuing a change to the SEC's Net Capital Rule as it relates to the settlement of syndicate accounts on corporate bond issuances. FINRA rules allow syndicate leads managers 90 days after deal closing to close syndicate accounts and return funds to co-managers. However, the SEC capital rule specifies that receivables older than 30 days cannot count towards regulatory capital compliance.

The current version of the receivables provision of the rule was put in place in 1987. Rule 15c3-1 specifies that dealers may count certain receivables towards regulatory capital, but only receivables 30 days old or younger. We are focusing our efforts on relief from the receivables provision of SEC’s Net Capital Rule.

FINRA 4210

As a longstanding priority for the Taxable Committee, the BDA continues to press FINRA to reassess Rule 4210. In a big advocacy win for the BDA, FINRA accepted the BDA proposal related to capital charge versus posting margin, and in October 2019, FINRA filed with the SEC a proposed rule change to extend to March 25, 2021, the implementation date of the amendments to FINRA Rule 4210 (margin requirements).

The BDA continues to believe that the FINRA 4210 Margin amendments are anti-competitive to smaller and mid-size broker-dealers and continues advocating against implementation. FINRA has also indicated that they will adopt other changes to the 4210 amendments and delay the compliance deadline for the rule beyond March 24, 2021, the current deadline.

GSE Reform

Following extensive BDA advocacy, the Federal Housing Finance Agency led by Mark Calabria submitted its final capital rule for mortgage giants Freddie and Fannie in mid-November. In a major advocacy win for the BDA, the final rule followed the BDA's "capital building" position laid out in the BDA's 2019 GSE White Paper.

Calabria, who has long pushed for more scrutiny of the mortgage market, applauded the announcement calling the provision the most significant achievement of his tenure, Calabra said:

“After considering all the comments on the proposed rule, and the Financial Stability Oversight Council’s review of the secondary mortgage market, FHFA is confident that the final rule puts Fannie Mae and Freddie Mac on a path toward a sound capital footing.”

FIMSAC and the TRACE Pilot Proposal

The TRACE pilot, as proposed, was to review the impact of giving traders two full days before having to reveal the largest block trade transactions. BDA opposed the pilot program as BDA member firms believe the proposed 48-hour delay in disseminating trade information would introduce significant and damaging opacity to the market, disadvantage retail investors, and include no incentive for middle-market firms to increase their capital commitment or provision of liquidity.

In a major advocacy win for the BDA, the move comes after widespread market opposition, while the BDA was the only sell-side trade group to join the opposition.

Rumors have emerged that FINRA and the SEC may reconsider an amended version of the TRACE Pilot proposal in the future. BDA will continue to closely monitor regulator actions on this issue and respond as appropriate.

LIBOR Transition

In July 2017, the UK Financial Conduct Authority announced the likely discontinuation by the end of 2021 of the London Interbank Offered Rate (LIBOR), the interest rate index used in calculating floating or adjustable rates for many loans, bonds, derivatives, and other financial contracts. The New York Fed has developed the Secured Overnight Financing Rate, an alternative short-term benchmark designed to replace LIBOR in some applications. All firms and their customers should be working towards LIBOR stopping publication at the end of 2021.

BDA has formed a working group so that firms may share information and best practices and identify advocacy issues and has recently co-hosted a webinar to discuss the pending changes with member firm Ballard Spahr which can be viewed here (password: Ballard1).

Events

Fixed Income Legal and Compliance webinar (Virtual)
April 5, 2021

Public Finance Leadership Roundtable (Virtual)
June TBD

Fixed Income Leadership Roundtable (Hybrid in-person and virtual)
Sept 2, 2021
Four Seasons Las Colinas
Dallas, TX

National Fixed Income Conference (Hybrid in-person and virtual)
November 4-5, 2021
Charlotte, NC

Benefits of Membership

Lobbying / Political Intelligence / Representation

Since our founding in 2008, BDA continues to be the only DC-based trade group exclusively focused on the US bond markets. Municipal, taxable, institutional, and retail. Sell-side fixed income is our only focus. And it shows.

This pure focus results in results-oriented, aggressive lobbying and advocacy for our member firms. We’ve grown from just 14 to now over 100 member firms headquartered coast to coast.

We strive for deep and broad member engagement of fixed income leadership into the advocacy process. It’s the BDA membership that makes the BDA an effective organization. The's BDA work is detailed and comprehensive across the US markets, but we have to add tangible value in a variety of ways. It always begins with aggressive advocacy, but being an effective trade group also means providing a platform for members to thrive.

Whether through our Business Solutions initiatives, our industry surveys, and reports, our industry leading events, or our latest product - Political Intelligence on key bond market policy issues. The BDA is constantly innovating to provide more value to all members.