ICMA Secondary Markets Update

ICMA Secondary Markets Update for Asia Pacific - October 2020

Mandatory buy-ins
ICMA's Electronic Trading Council – Axe Standards Working Group
Transparency and liquidity in the European bond markets
Regulatory updates
Relevant publications
Market data and liquidity
ICMA webinar recordings
ICMA podcast
ICMA forthcoming events


Mandatory buy-ins

The ICMA CSDR Settlement Discipline Working Group remains focused on implementation challenges of the mandatory buy-in regime with respect to cash bond and repo markets. The solutions and best practices being agreed by the Working Group will be incorporated into the ICMA Buy-in Rules which are being updated to create a contractual framework and market best practice to support implementation of and compliance with the new regulatory requirements (which are expected to come into force on 1 February 2022). The ICMA Buy-in Rules (part of ICMA's Secondary Market Rules & Recommendations), apply between members, and are usually incorporated into firms’ terms of business (members and non-members) by reference.
ICMA is currently preparing for the anticipated CSDR Review, which is expected to include Settlement Discipline. ICMA views this as an opportunity to drive meaningful change to the SD provisions, particularly the mandatory buy-in regime.
Please contact Andy Hill if you or your firm is not already engaged in this important initiative.

ICMA’s Electronic Trading Council – Axe Standards Working Group

The ETC has set up the Axe Standard Working Group (ASWG). The purpose of this group is to agree the definition of axes, runs, streaming prices, inventory. Then to create a code of conduct/guide to best practice for buy and sell-side interaction. This guide to best practice will be referred to in relevant bond market rulebooks.

Please contact Liz Callaghan to join the axe standard working group (ASWG).
Transparency and liquidity in the European bond markets
On 29 September 2020, ICMA’s Secondary Market Practices Committee published the discussion paper: Transparency and liquidity in the European bond markets.
The state of liquidity in the European bond markets has been hotly debated for a number of years, with the growing realization that due to a culmination of factors market liquidity has been in serial decline for more than a decade. There is an ongoing parallel discussion on the issue of transparency in the European bond markets. While it is broadly recognized that a degree of price transparency is fundamental for market efficiency and integrity, the intersection of transparency and liquidity is a far more complex consideration, yet an important one from the perspective of market development. ICMA has been at the forefront of industry work related to both bond market liquidity and the design and implementation of the European transparency framework for bonds. This paper attempts to pull those two workstreams together in order to explain how bond market structure and dynamics are very different to those of equity markets, that this is the basis for how liquidity is created in bond markets, and why this is central to any considerations around the framework for European bond market transparency, including any proposed future regulation related to the provision and design of a consolidated tape for bonds.



Regulatory and market updates


23 October 2020: HKMA designated nine authorized institutions as Primary Liquidity Providers (PLPs) for offshore renminbi market in Hong Kong for another term of two years. The HKMA will continue to provide each of the PLPs with a dedicated RMB repo facility of RMB2 billion, to facilitate their liquidity management when they carry out market-making activities and provide liquidity in the CNH market.

23 October 2020: PBOC published a consultation draft of Notice on Matters Related to Improving the Management of Cash Bond Market Makers in the Inter-Bank Bond Market.

23 October 2020: CSRC published a consultation draft of Administrative Measures for Convertible Corporate Bonds.

21 October 2020: Bond Connect Company Limited announced the launch of its new international electronic bond issuance system, ePrime.

21 October 2020: Reserve Bank of India announced On Tap Targeted Long-Term Repo Operations of up to three years tenor for a total amount of up to ₹1,00,000 crore at a floating rate linked to the policy repo rate. FAQ was updated on 26 October.

20 October 2020: Taiwan Financial Supervisory Commission (FSC) announced its plan to revise the Regulations Governing Issuance of NT$ Bank Debentures by Foreign Bank Branches in Taiwan.

13 October 2020: Taiwan FSC announced its plan to revise the Regulations Governing Issuance of Bank Debentures by Banks. Among the main revisions will be 1) defining High-Asset Customers, 2) stipulating the process of issuing bank debentures by branches overseas, 3) clarifying calculation of issuance quota, and 4) allowing them to be sold to High-Asset Customers.

9 October 2020: Bank of Japan amended "Prices of Eligible Collateral" and "Margin Ratios for the Purchase/Sale of Japanese Government Securities with Repurchase Agreements". These amendments shall become effective on November 27, 2020.

1 October 2020: ESMA updates statements on the impact of Brexit on MiFID II/MiFIR and the Benchmarks Regulation.

29 September 2020: SFC issued a circular on the electronic dissemination of investment product documents.

28 September 2020: ESMA publishes draft rules for third-country firms under new MiFIR and MiFID II regimes

25 September 2020: CSRC, PBOC and SAFE released the Measures for the Administration of Domestic Securities and Futures Investment by Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors (QFII/RQFII), effective from 1 November 2020.

24 September 2020: CFETS published the Notice on the Implementation of the Enhanced Arrangements of the Currency Conversion and FX Risk Management under the Bond Connect Scheme. Each Bond Connect investor will be able to select no more than three Hong Kong SAR settlement banks to conduct currency conversion and foreign exchange hedging services.

24 September 2020: FTSE Russell announced that Chinese Government Bonds will be included in the FTSE World Government Bond Index (WGBI) with inclusion scheduled to start in October 2021.

24 September 2020: Taiwan FSC announced that it will launch a Capital Market Roadmap by year-end.

21 September 2020: PBOC and SAFE published a consultation draft of the Administrative Measures on Managing Funds of Foreign Institutional Investors Investing in China's Bond Markets.

18 September 2020: CSRC published a consultation draft of the Interim Measures for the Administration of Credit Rating Business in the Securities Market.

18 September 2020: CSRC launched the Electronic Information Disclosure platform for the Capital Market. The website eid.csrc.gov.cn hosts information publicly disclosed by IPO companies, listed companies, non-listed public companies, securities companies, bond issuers, public fund management companies, etc.

15 September 2020: CFETS, CCDC and SHCH announced to extend trading hours of cash bonds in the inter-bank bond market to 20:00 GMT+8. Please see detailed arrangement (in Chinese) and a short summary (in English).

3 September 2020: CFETS launched anonymous bond auction service (X-Auction) on X-Trader. Implementation rules can be found here (in Chinese).  



Relevant publications

ICMA publications

ICMA Recommendations for Reporting under SFTR (updated version: 29 October 2020)
Transparency and liquidity in the European bond markets, ICMA (September 2020)
A Guide to best Practice in the European Repo Market, ICMA ERCC (September 2020) [revised edition]

October 2020

First 9 Months DCM Highlights, Dealogic (October 2020)
Assessment of the ASX Clearing and Settlement Facilities (October 2020)
The (ir)relevance of the nominal lower bound for real yield curve analysis, ECB (October 2020)

September 2020
Malaysia’s Domestic Bond Market : A Success Story, World Bank (September 2020)
Bond Connect – a Brief Review and the Journey Ahead, HKMA (28/09/2020)
Regional Bank Default Probabilities in the Covid-19 Crisis, Risk Control
Fixed Income Trading in 2020: How COVID-19 has changed the game, Fixed Income Leaders’ Summit
BIS Quarterly Review (September 2020)
Measuring Execution Quality in FICC Markets, FMSB (September 2020)
Lessons from COVID-19: Overview of Financial Stability and Non-Bank Financial Institutions, BlackRock, (September 2020)
A range of market, academic, and regulatory papers and studies can be found in the ICMA Bond Market Liquidity Library.


Market data and liquidity

Collateral Accepted by the Bank of Japan as of September 30, 2020, BOJ
Statistics on Securities Financing Transactions in Japan (Sept. 2020), BOJ
Basic Figures on Fails (Sept. 2020), BOJ
Liquidity Indicators in the JGB Markets (August 2020), BOJ
Market Volume: Observed trades in EUR and GBP investment grade corporate bonds, ICE Data Services
Top-traded corporate bonds in August 2020 (by volume), ICE Data Services

More market data can be found on the ICMA COVID-19 Data & Commentary webpage.



ICMA webinar recordings

ASEAN Sustainable Capital Markets: Regulators’ perspectives
ICMA Primary Market Forum
Green recovery in Asia-Pacific and the role of capital markets
ICMA AMIC - Sustainable finance: Taking stock of regulatory developments, market trends and investors' needs


ICMA podcast

The aging population of Japan and implications for the capital markets
Consolidating cross-border regulatory reporting
COVID-19: ICMA Asset Management & Investors Council market update week of 21 October 2020
Navigating through the crisis, an APG Asset Management perspective
The new normal: challenges and opportunities for women in financial services
CIBM-Direct: accessing China’s interbank bond market
In conversation with Arunma Oteh
COVID-19: Impact and Outlook from a Policy Perspective
GDP-Linked Sovereign Debt


ICMA forthcoming events

2020 CCDC European Investor Webinar – Opening and opportunities of China's bond market
3 November, 17:00-19:00 Beijing Time / 09:00-11:00 GMT

Developments in Bond Markets Contributing to Sustainability under COVID-19 – Globally and in Japan
13 November, 16:00-18:00 Japan Standard Time / 08.00-10:00 CET



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