ICMA Secondary Markets Update

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

GMRA legal opinions
Credit rating reform in China
Repo & sustainability
Mandatory buy-ins
Update to Bond Market Transparency Directory
Bond pricing distribution
SFTR implementation
Settlement efficiency
Common Domain Model (CDM) for repo and bonds
European Repo Market Survey
BCBS minimum haircuts
Regulatory and news updates
Relevant publications
ICMA Podcast episodes
Meetings and events


GMRA legal opinions
On 15 April, ICMA published updates to legal opinions in 60 jurisdictions. The 2021 GMRA opinion updates cover both the enforceability of the netting provisions of the GMRA, as well as the validity of the GMRA as a whole (subject to certain limitations). Furthermore, the 2021 GMRA opinion updates address the issue of recharacterisation risk (in respect of both the transfer of securities and the transfer of margin). All 2021 GMRA opinion updates cover, as a minimum, companies, banks and securities dealers. In addition, most opinions now additionally cover insurance companies, hedge funds and mutual funds as parties to the GMRA. Where relevant, each opinion also covers the central or national bank of the relevant jurisdiction as a party to the GMRA. The ICMA GMRA legal opinions are available to ICMA members on the ICMA website. Please contact us if you have any questions.

Credit rating reform in China

Since February 2021, Chinese regulators have undertaken reforms toward more market-based credit ratings in the domestic bond market. On 26 February, CSRC finalised the amendments to the Administrative Rules of Credit Rating Business in the Securities Markets, which among other measures remove the requirement of mandatory credit rating for the issuance of public corporate bonds. On 26 March 2021, NAFMII also announced that bond credit ratings will not be mandatory for issuing debt financing instruments (DFIs) and only issuer ratings will be needed. On 28 March, PBOC, NDRC, MOF, CBIRC and CSRC jointly issued a consultation paper proposing tighter rules for credit rating agencies. The draft notice particularly emphasises default rates as necessary for back-testing the quality of credit ratings and proposes initiating immediate internal investigation once a credit rating is adjusted by 3 notches or more.

ICMA is planning a virtual event in May to further discuss the evolving regulatory landscape on credit ratings in China, and implications for the markets. More details will be announced in ICMA events updates.

Repo & sustainability

ICMA will soon publish a consultation paper on the role of repo in sustainable finance, including existing opportunities and potential risks. 

In particular, the consultation paper will explore three possible applications of sustainability to the repo market: 1. Repo with green and sustainable collateral; 2. Repo with green and sustainable cash proceeds and 3. Repo between green and sustainable counterparties. 

The paper seeks to acknowledge the complexity of the subject and to foster a broader understanding of a variety of views. The paper is due to be published this week. 
Mandatory buy-ins
Conventional, non centrally-cleared bond market buy-in mechanisms provide a buyer of securities, in the event of a settlement fail, the contractual right to source the securities elsewhere (usually for guaranteed delivery), cancel the original trade, and settle between the two original counterparties any differences arising from the net costs of the original transaction and the buy-in transaction. 

The Central Securities Depositories Regulation (CSDR) introduces measures to address settlement fails, including Mandatory Buy-ins. Under CSDR, initiating the CSDR buy-in process will be a regulatory requirement and not a right. The CSDR Mandatory Buy-ins are intended to apply extraterritorially to all investment firms settling trades on EU (I)CSDs, regardless of location or jurisdiction. 

On 1 April 2021, ICMA submitted its feedback on the European Commission’s Roadmap for the CSDR Review. Once again, ICMA posited that the mandatory buy-in framework, as currently drafted, requires significant revisions before attempting implementation. Furthermore, there are compelling arguments for not imposing a mandatory buy-in regime on the European bond markets, and that this could undermine market liquidity and stability.
On 11 March 2021, ICMA, along with 14 other markets associations, wrote to the European Commission and ESMA raising concerns about the implementation of the mandatory buy-in requirement that is due to go go-live on 1 February 2022, while concurrently undertaking a review of the regulation. Given the significant global implementation effort required to support implementation, the associations suggest that a far more robust approach would be to make the required revisions to the mandatory buy-in regime arising from the Review before attempting implementation. Accordingly the letter asks the European Commission for clarity on the Review and implementation schedule of CSDR-SD at the earliest opportunity.
Meanwhile, ICMA remains focused on supporting the implementation of the CSDR Settlement Discipline regime in the international bond markets, in particular the controversial mandatory buy-in obligation. ICMA will do this by updating its Buy-in Rules (part of the ICMA Secondary Market Rules & Recommendations) to provide a contractual framework and market best practice for the buy-in process.
Please contact Andy Hill if you wish to learn more about ICMA’s advocacy and implementation work related to CSDR-SD or would like to participate in ICMA’s CSDR Settlement Discipline Working Group.

Update to Bond Market Transparency Directory

ICMA has updated its Bond Market Transparency Directory to include the latest guidance provided by the UK FCA in its Post-Brexit transparency workshop held on 11 March 2021. The FCA intends to use the annual LIS and SSTI thresholds expected to be published by ESMA in April 2021. The FCA intends to determine an instrument traded in the EU and UK liquid only if it is liquid on both ESMA and FCA calculations. It will fall to trading venues whether to follow FCA liquidity determinations or only refer to ESMA determinations. The FCA is expected to publish a consultation by end April to address changes to MiFID II rules in the UK, covering similar, but not identical considerations to the EU's MiFID II 'quick fix'.
The purpose of the directory is to provide a consolidated view to compare both regulatory rules and best practice guidance on bond trade reporting transparency regimes, as well as details on reporting fields and exceptions in more than 15 jurisdictions globally. The directory is a non-exhaustive overview and is intended to be a living document with periodic reviews.

Bond pricing distribution

ICMA’s Electronic Trading Council (ETC) is creating industry standards for bond pricing distribution and best practices. Listen to Liz Callaghan interviewing Ricky Goddard, head of trading at Schroders, about current bond pricing distribution practices in the EU and the challenges facing bond markets. They also discuss the importance of standardising current practices used today to advertise buy or sell bond interests and the role of electronic & technology solutions in price/quote distribution and the obstacles in achieving good quality and accurate bond pricing data.

SFTR implementation

Reporting of issuer LEIs for non-European issuers: ESMA and the FCA have both extended the forbearance period in relation to the reporting of Legal Entity Identifiers (LEIs) for non-EEA (European Economic Area) issuers under SFTR. The initial 12-month grace period granted by ESMA was due to come to an end on 13 April. Approaching this deadline, on 6 April, the FCA clarified that issuer LEIs for non-EEA third country issuers are not required under UK SFTR until at least 13 April 2022. ESMA issued a similar statement on 13 April, confirming that under EU SFTR issuer LEIs for third country issuers will not be made mandatory until 10 October 2022. The statements follow a joint industry letter co-signed by ICMA which was sent to ESMA, various NCAs, and the FCA on 8 March to reiterate industry concerns around the lack of availability of LEIs for issuers outside of Europe.

ESMA Q&A update: ESMA continue to expand their SFTR Q&As. The latest update was published on 6 April, adding one further topic to the document: the reporting of SFTs involving external portfolio managers. In total, the SFTR Q&As now cover questions on nine topics. ICMA has reviewed the latest additions with members of the European Repo and Collateral Council (ERCC)’s SFTR Task Force and incorporated a few related changes in the latest internal version of the ICMA SFTR recommendations.

ESMA Data Quality Report: On 15 April, ESMA published its first report on data quality under EMIR and SFTR reporting. The report assesses progress made to date in relation to the quality of the data reported under both regimes and highlights areas for improvement, although it only includes limited details on SFTR given the relatively recent reporting start. Going forward this will be an annual review.

Settlement efficiency

Over the past months the ERCC has focused extensively on the challenges around firms’ intraday liquidity management and related opportunities for settlement efficiency. As a first result of this work, a number of best practice recommendations have been agreed and incorporated into the ERCC’s Guide to Best Practice in the European Repo Market. These targeted updates to the Guide were published on 30 March, covering recommendations related to the shaping of settlement instructions, partial settlement and hold and release functionality. The topic remains a key priority, as the ERCC is discussing additional measures to help reduce the level and impact of settlement fails. A set of further recommendations have been agreed at a cross-industry workshop hosted by the ERCC on 26 February and will be communicated in due course. The challenges around settlement efficiency and the related ERCC recommendations were discussed in more detail in the ERCC Annual General Meeting on 30 March with a panel of market experts.

Common Domain Model (CDM) for repo and bonds

ICMA is cooperating with ISDA to extend the development of the Common Domain Model (CDM) to include repo and, by extension, outright bond transactions: a single, common digital representation of securities trade events and lifecycles intended to enhance standardization and facilitate interoperability across firms and platforms. The development of the CDM for all financial markets and securities will be critical in creating cross-industry efficiencies while easing the development and adaptation of new technologies.

ICMA’s CDM Steering Committee and REGnosys have held regular meetings since the beginning of March to model repo and bonds in the CDM. The main focus to date has been to develop a conceptual repo model that is aligned with the GMRA and the ICMA ERCC Guide to Best Practice in the European Repo Market

Further information on the CDM for repo and bonds can be found on ICMA’s CDM webpage. ICMA Member firms who would like to contribute to this initiative are welcome to get in touch.

European Repo Market Survey

On 23 March, the ERCC released the results of its landmark 40th semi-annual survey of the European repo market. The survey, which calculated the amount of repo business outstanding on 9 December 2020 from the returns of 60 financial institutions, sets the baseline figure for the outstanding size of the European market at EUR 8,285 billion compared with EUR 7,885 billion in June 2020 and down from the record high of EUR 8,310 billion in the December 2019 survey.

The December survey is a snapshot of the market at the end of an unusual year, with the COVID-19 pandemic having triggered market turbulence in February and March, and just before the end of the post-Brexit transition period. Survey results show the market tending to revert to long-term trends, although a few changes seem to have persisted, including the recent resilience of voice-brokered business and the sharp recovery in the share of core euro area government securities used as collateral.
For a more detailed discussion of the latest survey results as well as the longer-term market trends over the past 20 years, listen to the ICMA podcast with Richard Comotto, the survey author.

BCBS minimum haircuts

On 31 March 2021, ISLA and ICMA submitted a response to the Basel Committee on Banking Supervision’s Consultation on the technical amendments for minimum haircut floors on Securities Financing Transactions. While the associations welcome the proposed technical amendments, in particular for borrowers (the counterparty paying the haircut on the collateral posted), they request that all transactions where the bank is paying a haircut on the collateral posted to the securities lender are deemed out of scope of the minimum haircut floors, in accordance with CRE564, and provided for in a separate amendment.


Regulatory and news updates


15 April 2021: NAFMII revised its rules on Credit Risk Mitigation instruments (CRM, which are similar to credit default swaps in the international markets), improving the trading and settlement mechanisms of CRM.

15 April 2021: HKMA and SFC issued a joint consultation on the annual update to the list of Financial Services Providers under the OTC derivatives clearing regime.

12 April 2021: Bank of Thailand (BOT) launched the registration system for the Phase 1 of the Bond Investor Registration Scheme. Under phase 1 of the scheme, non-resident investors who are ultimate beneficiary owners are required to have a segregated securities account and register with the BOT.

12 April 2021: FSB published a first set of FAQs in relation to the global initiative for Securities Financing Data Collection and Aggregation.

7 April 2021: RBI extended the On Tap Targeted Long-Term Repo Operations Scheme further by six months until 30 September 2021.

6 April 2021: ESMA updated its Q&As on MiFID II and MiFIR transparency topics.

2 April 2021: PBOC published the Announcement No. 4 [2021] for the interbank bond market, emphasising that CCDC and SHCH as infrastructures should establish direct system connection with CFETS and implement electronic data transmission. It also no longer requires bond issuers and lead underwriters to report the list of initial holders and their holdings. 

1 April 2021: HKMA announced the launch of the delivery-versus-payment (DvP) link for cross-currency securities transactions between the HKD CHATS and the Bank of Japan Financial Network System for Japanese Government Bond (BOJ-NET JGB) Services. The link would support DvP settlement of the HKD sale and repurchase (repo) transactions using Japanese Government Bonds (JGB) as collateral.

31 March 2021: PBOC issued a notice to the infrastructures in the interbank bond market on further enhancing the infrastructure services for overseas investors.

31 March 2021: RBI published the investment limits for Foreign Portfolio Investors in corporate bonds and Central Government securities for FY 2021-22.

30 March 2021: Subsequent to RBI’s Notification in March 2021 that derivatives, repo and reverse repo are Qualified Financial Contracts (QFC) subject to the Bilateral Netting of Qualified Financial Contracts Act, 2020, RBI amended related prudential guidelines accordingly.

30 March 2021: ESMA proposes amendments to MiFIR transactions and reference data reporting regimes.

29 March 2021: FTSE Russell confirmed that Chinese Government Bonds will be included in the FTSE World Government Bond Index (WGBI) commencing 29 October 2021. The phased inclusion will occur over a period of 36 months. 

28 March 2021: PBOC, NDRC, MOF, CBIRC and CSRC jointly issued a consultation paper proposing tighter rules for credit rating agencies.

26 March 2021: NAFMII issued a notice making crediting rating not a mandatory requirement for Debt Financing Instruments.

23 March 2021: RBI decided that non-centrally cleared derivatives exposures will continue to be outside the purview of exposure limits under the Large Exposures Framework till September 30, 2021.

22 March 2021: SEBI issued a circular to clarify the valuation of perpetual bonds issued under Basel III framework.

19 March 2021: BOJ decided to continue with monetary easing, in order to achieve the price stability target of 2 percent. Among the measures, it will ensure that the range of 10-year JGB yield fluctuations will be between around plus and minus 0.25 percent from the target level and purchase ETFs and Japan real estate investment trusts as necessary.

16 March 2021: The Supreme People’s Court of China published the Provisions on the Jurisdiction over Cases of the Beijing Financial Court, which was newly established in the same week. Among other measures, all lawsuits against overseas entities that have allegedly damaged the legitimate interests of Chinese domestic investors will be centralised and heard at the new court.



Relevant publications

ICMA publications
Asian International Bond Markets: Development and Trends, ICMA
The internationalization of the China corporate bond market, ICMA
ICMA briefing note on ECB Pandemic Emergency Purchase Programme bi-monthly data, April 2021
ICMA market data page

April 2021
Basic Figures on Fails (Mar. 2021), Bank of Japan
Collateral Accepted by the Bank of Japan (End of Mar. 2021), Bank of Japan
Scott Skyrm on the Dynamics of the Repo Market in 2021, The Bridge, Podcast, April 2021 

March 2021
Liquidity Indicators in the JGB Markets (February 2021), Bank of Japan
Statistics on Securities Financing Transactions in Japan (Feb. 2021), Bank of Japan
Asset Purchases by Central Banks, BNM Economic and Monetary Review 2020
The Hong Kong Debt market in 2020, HKMA Quarterly Bulletin 
Debt market (p.43-45), HKMA Half-Yearly Monetary and Financial Stability Report 
Non-Financial Corporate Credit and Recessions, US Federal Reserve
Corporate Funding and the COVID-19 Crisis, IMF Working Paper
The Response by Central Banks in Emerging Market Economies to COVID-19, RBA Bulletin
Interest Rate Swaps and the Transmission Mechanism of Monetary Policy: A Quantile Connectedness Approach, University of Portsmouth
The Persistent Compression of the Breakeven Inflation Curve, Liberty Street Economics
Bond Mutual Fund Outflows: A Measured Investor Response to a Massive Shock, ICI Viewpoint
Liquidity management and asset sales by bond funds in the face of investor redemptions in March 2020, BIS Bulletin, No.39
Asset managers, market liquidity and bank regulation, BIS
Networking the yield curve: implications for monetary policy, ECB
Procyclical asset management and bond risk premia, ESRB
Cross-border credit derivatives linkages, ESRB
Congruent Financial Regulation, BPEA Conference Drafts
Dollar funding of non-US banks through Covid-19, BIS Quarterly Review
Bond Markets (p. 43-45), BOK Financial Stability Report (December 2020)


ICMA Podcast episodes


Infrastructure for Tomorrow – the AIIB
ICMA’s Mushtaq Kapasi speaks to Sir Danny Alexander, Vice President and Corporate Secretary of the Asian Infrastructure Investment Bank about the AIIB's mission and strategy to develop sustainable infrastructure in Asia. Sir Danny discusses in particular the AIIB’s Climate Change Investment Framework and COVID-19 Crisis Recovery Facility, along with other innovations in the sustainable capital markets.


The OECD – improving policies & livelihood across nations over 60 years
ICMA’s Chief Executive Martin Scheck speaks to Greg Medcraft, Director, Directorate for Financial and Enterprise Affairs at the Organisation for Economic Co-operation and Development (OECD) about its mission and achievements to improve policies and livelihood across nations over the past six decades, its role in the international capital markets, and its global agenda including in the area of sustainability as well as the institution’s efforts in supporting digital transformation.

ICMA podcast  

40th edition of ICMA’s European Repo Survey
On the occasion of the 20th anniversary of the European Repo Market Survey, ICMA’s Alex Westphal speaks to Richard Comotto, author of the Survey, to discuss the evolution of the survey, long-term trends in the European repo market, as well as the results of the current survey and the outlook for the repo market post Brexit transition.


A buyside view - bond pricing distribution today
ICMA’s Liz Callaghan talks to Ricky Goddard, Head of trading at Schroders, about current bond pricing and axe distribution practices in the EU bond markets and the challenges that the market faces today. They discuss the importance of standardising axe information, which is the term commonly used to advertise buy or sell bond interests, the role of electronic & technology solutions in its distribution and the obstacles in achieving good quality and accurate bond pricing/axe data.

ICMA podcast  

An insight into the Australian and New Zealand sustainable bond market
ICMA’s Mushtaq Kapasi speaks with David Jenkins, Global Head of Sustainable Finance at National Australia Bank, about the Australian and New Zealand sustainable bond market. They delve into how investors are viewing recent product innovations and whether they are willing to pay a premium for sustainability. They also explore opportunities for further growth of the market, and the steps needed to make these possible.

ICMA podcast  

Enel’s sustainability strategy and the role of sustainability-linked bonds
Nicole Della Vedova, Head of Corporate Finance and Giovanni Niero, Sustainable Finance Project Leader at Enel speak to Simone Utermarck about Enel’s journey from a green bond issuer to pioneer of sustainability-linked bonds (SLBs), how the release of the Sustainability-linked Bond Principles propelled the growth of SLBs and what to consider when structuring an SLB.

ICMA podcast  

The Network for Sustainable Financial Markets – the people behind it, its purpose and scope
Rebekah Bray, Vice-Chair of ICMA Future Leaders speaks to Martina Macpherson, President of the Network for Sustainable Financial Markets (NSFM) and Head of ESG Strategy, ODDO BHF AM about NSFM, its focus to support and enable the next generation of sustainable finance experts, capital market professionals and academics and its aim to work on initiatives that are in alignment with the 17 United Nations’ Sustainable Development Goals.




Meetings and events

Secondary Market Practices Committee (SMPC) Meeting
9 June, 3pm-4.30pm CET (invitation only)
ICMA Event Recording: ICMA European Repo and Collateral Council (ERCC) Annual General Meeting and video updates

ICMA Event Recording: Tokenisation and Central Bank Digital Currency – the impact on bond markets  

ICMA Event Recording: Accelerating Uganda’s repo market development

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



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