On April 23, 2015, the Ontario Securities Commission (OSC) released its report on the Canadian fixed income market and published OSC Staff Notice 21-708 – OSC Staff Report on the Canadian Fixed Income Market and Next Steps to Enhance Regulation and Transparency of Fixed Income Markets.

The Canadian Fixed Income Market Report represents the first phase of the OSC’s review of the fixed income market which is focused on corporate bonds. The report draws four broad conclusions. First, the limited and fragmented nature of data available on the fixed income market makes it challenging to conduct a comprehensive assessment. The OSC also observed that large investors have more information and bargaining power than small investors. The third key insight of the report is that there has been limited adoption of electronic trading and alternative trading systems, especially with respect to corporate bonds. Finally, direct retail participation is low – retail investors typically access the fixed income market through investment funds.  

OSC Staff Notice 21-708 provides insight into how the OSC intends to move forward from the conclusions it reached in its report. In this respect, the OSC has three goals. First, it intends to facilitate more informed decision making among all market participants. OSC Staff are currently reviewing whether the transparency framework set forth in NI 21-101 Marketplace Operation and the level of post-trade transparency is sufficient. In the coming year, OSC staff intend to monitor the implementation of new cost and performance reporting rules in NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations and to work with the CSA to facilitate finding documents relevant to fixed income offerings on SEDAR.

Second, the OSC intends to enhance market integrity by overseeing the implementation of the recently adopted IIROC Rule 2800C as it is phased in. IIROC Rule 2800C Transaction Reporting for Debt Securities requires reporting of fixed income product trade information by dealers. The OSC also intends to analyze debt transaction data on a going forward basis to assist in policy formulation.

Finally, the OSC intends to evaluate whether access to the debt market is fair and equitable. OSC staff intend to work with IIROC to better understand how investment dealers allocate new fixed income issues as they consider whether a regulatory response is necessary to concerns by smaller market participants about their ability to participate in new fixed income issues.