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IMA calls for changes to bond market

The Investment Management Association (IMA) says retail investors are not directly participating in the sterling corporate bond market, and has called for reform.

According to the IMA, the minimum permitted investment in Britain is typically higher than in continental Europe, making “the likelihood of retail participation in the UK less likely”.

It adds that the large number of bond issues and “the complex way they interact” also make it difficult for investors to understand the implications involved for each issue in the event of corporate failure.

The comments follow the publication of an IMA-commissioned report, The Impact of the Credit Crunch on the Sterling Corporate Bond Market. The report concluded that the disruption in the sterling corporate bond market in the period after the credit crisis was damaging for the buy-side.

It added the dealer market structure failed during the period and “may not recover in its previous form”.

To support the recovery of the bond market, the IMA proposed several measures. It said that in the short term, the Bank of England should consider “engaging further in the corporate bond market”.

It also suggested the Financial Services Authority (FSA) “should engage actively with liquidity providers, exchanges and MTFs [multi-lateral trading facilities] with the aim of improving the market”.

The IMA says it intends to review the recommendations in a year’s time and “is keen to engage with all market participants to promote reform”.

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