The U.K. FICC Market Standards Board is consulting on its draft Statement of Good Practice for Participation in Sovereign and Supranational Auctions in Fixed Income Markets. The FMSB is a standards setting body operated by wholesale market participants that was established in 2015. It is mandated to issue Standards that improve conduct in the wholesale Fixed Income, Currencies and Commodities markets. FMSB Member Firms are expected to consider their practices in light of the Standards, but the Standards are not binding and non-compliance will not affect whether a firm is deemed to have met its regulatory obligations.
The draft Statement of Good Practice considers the practices adopted by market participants involved in the auctioning of government or supranational bonds. The Statement applies to “Primary Dealers”, i.e. firms that are appointed by an issuer to buy, promote and distribute government bonds, “Dealers”, i.e. firms that are authorized to deal in government bonds but who are not Primary Dealers and “Investors”, which include participants in the primary or secondary markets, investing either for their own account or on behalf of their clients. Key principles outlined in the Statement relate to:
- Conflicts of interest management: Primary Dealers and Dealers should take appropriate measures to identify conflicts of interest in auctions and should ensure their hedging of auction orders and secondary market activity is not designed improperly to influence or manipulate auction levels;
- Activities of investors: investors should not participate in auctions with the aim of improperly influencing the auction results;
- Information handling: information regarding individual investor client orders should not be disclosed by Primary Dealers or Dealers unless there is a valid reason for doing so; and
- Policies, Procedures and Training: Primary Dealers and Dealers should consider establishing policies, procedures and/or guidance for their auction arrangements taking into account the Statement of Good Practice.
Responses to the consultation should be submitted by January 27, 2020. The FMSB anticipates that it will publish the final Statement shortly thereafter.