Market Structure & Dynamics

Regularly reviewing our market structure, processes and dynamics is a key component to achieving SFA’s mission of promoting a robust, liquid and healthy structured finance market as it grows and adapts to the consumers and businesses it supports.

It may surprise policymakers and regulators, as well as even some market participants, to know that it is currently very difficult – and sometimes impossible – for bondholders to communicate with the companies that issued the securities they own or for bondholders who own the same security to communicate with one another.

The current system is so unreliable that when evaluating potential solutions for the transition away from LIBOR, one of our financial markets’ most serious risk today, market participants view the option of soliciting bondholder consent for an amendment as largely unfeasible.

Publications

November 21, 2017

SFIG files Amicus brief in NCSLT case

February 18, 2020

SFA released an overview of FIMSAC’s Credit Ratings Subcommittee discussion on credit rating agency compensation models and perceived conflict of interest.

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“Market participants are keenly focused on and have rightfully questioned how – well into the digital age – the significant limitations of the current communication system remain.” – Kristi Leo, SFA, President

Market participants have rightfully questioned how – well into the digital age and long since record keeping transitioned from physical certificates to an electronic platform – the significant limitations of the current communication system remain. While there is certainly a complex chain of intermediaries that often separates the record-owner from the beneficial owner with only the final custodian retaining the record of the actual investor’s identity, today’s technology – including blockchain – provides viable solutions.

SFA is leading an effort within the structured finance market to identify the requirements for a robust and effective bondholder communication framework that could apply to all new bond issuance, if fully adopted.

Our Bondholder Communication Task Force has commenced a review of the current bondholder communication frameworks to identify operational, legal, economic and regulatory issues pertaining to those frameworks and drafted a specification document for an improved bondholder communication platform to address those issues. This project specification document will serve as the backbone for potential industry service providers to evaluate their ability to develop a platform meeting the industry’s needs at a cost point acceptable to the industry.

In February 2020, the Credit Ratings Subcommittee of the SEC’s Fixed Income Market Structure Advisory Committee (FIMSAC) held a meeting in which they discussed their recent discussion document on credit rating agency compensation models and perceived conflicts of interest. In response to the SEC’s request for market feedback, SFA is forming a Task Force to monitor the ongoing discussions at FIMSAC, respond to the FIMSAC’s request for industry input and help inform engagement should a formal policy recommendation be put before the SEC.

To join our task force, please contact [email protected].

“Strong governance is a key pillar of a sustainable securitization market, but we can’t fully have strong governance without a mechanism for transaction parties to communicate with each other in a timely fashion when the circumstances so require. I’m very optimistic that with the Structured Finance Association’s leadership and the commitment of industry participants we will finally be able to overcome what has been a persistent obstacle to better governance in our industry for many years.”

- Francisco Paez, MetLife Investments

News

Industry News

October 8, 2020

New data from S&P Global found that global issuance across the four major sectors (ABS, CLOs, CMBS and RMBS) totaled $54 billion in September bringing year-to-date issuance to $333 billion.

Industry News

August 28, 2020

After financial experts warned that the pandemic would cause the CLO market to go through its own crisis because of a wave of rating agency downgrades, new data found that this “wave” turned out to be only a small trickle.

Industry News

August 10, 2020

A new survey by the Promontory Interfinancial Network found that many banks are preparing to deal with the economic consequences of the coronavirus for the long term.

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Contact

Jen Earyes

Head of Policy

Jennifer Wolfe

Director, ABS and Investor Policy