Patrick McHenryChairman

Washington, July 14, 2017 -

The Subcommittee on Capital Markets, Securities, and Investment held a hearing today to review the fixed income market structure. The hearing and witness testimony provided the Subcommittee with the background and foundation to examine the optimal design of the fixed income market based on today’s market conditions. The hearing also included an important discussion on the need for enhanced transparency and liquidity to ensure that this market operates effectively and efficiently for issuers and investors. 

“The United States has the deepest, strongest, most liquid capital markets in the world and the fixed income market is one of the largest sources of capital for issuers and investment opportunities for a broad array of savers and investors,” said Subcommittee Chairman Bill Huizenga (R-MI). “While lesser-known to some investors, the fixed income market is nearly twice as large as the equity market and differs significantly…Fixed income serves as a source of funding for companies and provides capital for them to grow and create jobs, as well as funding local infrastructure projects such as roads and bridges…Since fixed income markets are different than equity markets, they should have a regulatory structure that appropriately reflects the market’s unique characteristics.”

Key Takeaways from the Hearing

• Fixed income markets provide a critical source of funding to companies and governments that enable them to create jobs and fund critical infrastructure projects.  Given these important functions, the fixed income markets must operate efficiently, transparently and effectively.

• A significant number of fixed income transactions, in particular municipal security transactions, are still done over the phone.  Markets and market participants should work together to increase the use of electronic trading.

• Policymakers have a role to play to ensure that retail customers are reaping the maximum benefit of their fixed income investments, especially in the municipal securities markets.

Topline Quotes from Witnesses

“The ATSs [electronic trading] have brought positive changes to the municipal bond markets through these auctions by increasing price transparency and liquidity and by helping buyers and sellers find each other.” – Matthew Andresen, Founder and CEO, Headlands Global Markets, LLC

“While the fixed income markets are fundamentally healthy today, there are significant uncertainties about whether our economy is operating at full efficiency…policymakers need to calibrate existing and future rules to ensure they do not unduly impede the ability of the market to provide the capital needed to finance strong growth in the economy.” – Randy Snook, Executive Vice President, Securities Industry and Financial Markets Association

“Fixed income markets provide a critical source of funding to companies and governments. The capital raised in our markets provides growth capital for corporate America to create jobs, fund key infrastructure projects for municipalities to upgrade roads and bridges, and provides a vital funding mechanism for the federal government.” – Alex Sedgewick, Vice President, Head of Fixed Income Market Structure & Electronic Trading, T. Rowe Price

“The market for U.S. Treasury Securities (“USTs”) is widely recognized to be the most liquid and consequential market in the U.S. and perhaps the world.  Trillions of dollars or USWTs circumnavigate the globe, trading across, and resting in, the accounts of individual investors, institutions, corporations, and governments on every continent.  Trillions of dollars more in derivatives on USTs trade separately and just as actively…That said, the market for USTs could benefit from greater transparency, organization and efficiency.” – John Shay, Global Head of Fixed Income and Commodities, Nasdaq