ICMA Secondary Markets Update

ICMA Secondary & Repo Markets Update for Asia Pacific - February 2021

Mandatory buy-ins
IOSCO Survey on fixed-income ETFs
Consultation papers
Regulatory updates
Relevant publications and news items
ICMA Podcast episodes
Future meetings


Mandatory buy-ins

On 2 February 2021, ICMA submitted its response to the European Commission’s targeted consultation on the review of CSDR. ICMA’s response, prepared by its dedicated CSDR Settlement Discipline Working Group, focused exclusively on the section dedicated to Settlement Discipline. Providing data and analysis, the response supports ICMA’s long held position that the CSDR mandatory buy-in regime should not be implemented before undertaking a robust bond market impact assessment. The response also illustrates how destabilizing the regime would have been during the March-April 2020 market turmoil.
ICMA is next turning its attention to the timing for any changes to the CSDR buy-in regime following the review, given that the current, problematic provisions are scheduled to come into force on 1 February 2022.
Please contact Andy Hill if you wish to learn more about ICMA’s advocacy and implementation work related to CSDR-SD.

IOSCO Survey on fixed-income ETFs
In December 2020, IOSCO published a survey focusing on issues related to fixed income ETFs during the March-April 2020 market turmoil. The questions are addressed to both asset managers and market makers. ICMA is considering issuing a response with both the help of our Asset Management and Investors Council (AMIC) and the Secondary Market Practices Committee (SMPC). As well as responding on behalf of issuers and market makers, ICMA would also like to reflect the views of investors. The deadline to respond is 1 March 2021. Anybody interested in contributing to ICMA’s response should contact Arthur Carabia or Andy Hill.

Consultation papers
ESMA consults on the impact of algorithmic trading.

MiFID II/MiFIR requires the European Commission (EC) to present a report to the European Parliament and the Council, after consulting ESMA, on a number of areas under MiFID II/MiFIR including algorithmic trading. Therefore, ESMA is seeking input from market participants on the impact of requirements under MiFID II/MiFIR regarding algorithmic trading.

The consultation paper covers the overall approach towards algorithmic trading, in particular:

  • Algo definitions and authorisations
  • Algo testing, including self-assessment testing
    • Prevention of disorderly trading conditions – Trading venues, OTC and SI firms
  • Testing scenarios
  • Algos and market making agreements

Furthermore, the consultation paper addresses crisis-related issues such as trading venue circuit breakers and the deployment of speedbumps. However, ICMA will solely be responding to bond algorithmic trading related questions. This ESMA algo consultation is due on 12 March 2021.
Please contact Liz Callaghan if you would like to participate in the MiFID II Working Group taskforce responding to this algo consultation.



Regulatory updates


5 February 2021: PBOC, CBIRC, CSRC, SAFE, HKMA, SFC, and Monetary Authority of Macao agreed on the principles of supervisory cooperation under the cross-boundary Wealth Management Connect, and signed a Memorandum of Understanding on the Launch of the Cross-Boundary Wealth Management Connect Pilot Scheme in the Greater Bay Area.

5 February 2021: RBI set out in a statement various developmental and regulatory policy measures. One of the proposals is that foreign portfolio investor (FPI) investment in defaulted corporate bonds will be exempted from the short-term limit and the minimum residual maturity requirement under the Medium Term Framework.

4 February 2021: RBNZ updated its list of Eligible Securities for Repurchase Transactions.

3 February 2021: FSC Korea announced its specific policy agenda for the year.

1 February 2021: FSC Korea announced plans to improve the competitiveness of the publicly traded fund market.

1 February 2021: APRA released its policy and supervision priorities for 2021.

25 January 2021: Japan Exchange Group signed MoU with Shanghai Stock Exchange and Shenzhen Stock Exchange respectively on Japan-China ETF Connectivity.

20 January 2021: SFC and Thai SEC signed a MoU concerning Mutual Recognition of Funds. On 3 February, Thai SEC started to seek public comments on the drafted regulations for the Mutual Recognition of Funds between Hong Kong and Thailand.

19 January 2021: FSC Korea announced its work plan for 2021.

18 January 2021: FMA New Zealand consulted on whether to continue exempting offerors of certain financial products from some disclosure requirements to wholesale investors with a minimum investment amount of NZ$750,000.



Relevant publications and news items

February 2021
Collateral Accepted by the Bank of Japan (End of Jan.), BOJ

January 2021
The internationalization of the China corporate bond market, ICMA
The European repo market at 2020 year-end, ICMA
The Role of Collateral in Borrowing, RBA
Holdings of Kauri bonds (nominal value), RBNZ
Outlook for Economic Activity and Prices, BOJ
Statistics on Securities Financing Transactions in Japan (Dec. 2020), BOJ
Blueprint for Money Market Development 2025, Bank Indonesia
Monetary Policy Report, December 2020, Bank of Korea
Monthly Statistical Bulletin, January 2021, Bank of Korea
Monetary and Financial Developments in December 2020, BNM
Issuance and valuation of corporate bonds with quantitative easing, ECB, Working Paper Series No. 2520
The implications of liquidity regulation for monetary policy implementation and the central bank balance sheet size: an empirical analysis of the euro area, ECB Working Paper Series No. 2515
Asset Purchase Facility Quarterly Report - 2020 Q4, Bank of England
Sovereign credit and exchange rate risks: evidence from Asia-Pacific local currency bonds, BIS Working Papers, No. 918
From lender of last resort to market maker of last resort via the dash for cash - why central banks need new tools for dealing with market dysfunction – speech by Andrew Hausser, Executive Director for Markets of the Bank of England, at Thomson Reuters Newsmaker
Unconventional Monetary Policies in Emerging Markets and Frontier Countries, IMF
Infrastructure Debt Capital Charges for Insurers, Risk Control, Client Report, No.20-125a


ICMA Podcast episodes

The internationalization of the China corporate bond market
Kāinga Ora and sustainable finance in New Zealand
ICMA briefing on the global transition from LIBOR to risk-free rates in the bond market
COVID-19: ICMA Asset Management & Investors Council market update (3 Feb 2021)
The future of electronic trading in bond markets with Neptune Networks Ltd.
Economic outlook for 2021 and beyond with Philippe Waechter, Ostrum Asset Management
Outlook for the Euro area and the UK from George Buckley, Nomura
COVID-19 and accelerating structural change with Paul Donovan, UBS Wealth Management
The market environment in 2021 with Christoph Rieger, Commerzbank
Economic outlook for 2021 with Marc Chandler, Bannockburn Global Forex
2021 Outlook for the asset management industry
You may also access our podcasts on the Chinese platform Ximalaya.


Future meetings

Secondary Market Practices Committee (SMPC) Meeting
16 March, 10:00PM-11:30PM HKT / 3:00PM-4:30PM CET

ICMA European Repo and Collateral Council (ERCC) Annual General Meeting
30 March, 9:00PM-11:00PM HKT / 3:00PM-5:00PM CEST / 2:00PM-4:00PM BST

For more information, please contact apac@icmagroup.org.



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