View more on these topics

IMA warns market structure impeding retail corporate bond take-up

The Investment Management Association says the current market structure is preventing direct retail participation in the corporate bond market.

According to a report commissioned by the IMA, very large bond issue volumes and their complex interaction make it difficult for investors to understand the implications involved for each issue in the event of corporate failure.

It says: “Although the number of companies issuing bonds is akin to that in the equity markets, each issuer typically has a plethora of different bond-issues but only one type of share.”

The IMA also notes that the minimum permitted investment or “lot” in the UK is typically much higher than in Europe, making the likelihood of retail participation in the UK less likely.

It says UK lot sizes are usually £50,000 but in Germany, 23 of the 29 corporate bond issues in 2008 were €1,000.

It says the over the counter nature of the market makes it hard to achieve ‘normal’ levels of pre and post-trade transparency, compared to other markets. and designing and implementing best execution rules which is key to retail investor protection is more difficult.

IMA director of markets Jane Lowe says: “While markets should be freely available to both retail and institutional customers, the research shows that, while bonds may on the face of it be easier to understand than equities, the nature of primary issuance and secondary market trading arrangements in the UK act to prevent retail participation in the sterling corporate bond market.”


Recommended

Global executives call for tighter regulation

The global economic downturn has shaken capitalism to its foundations, according to a global executive survey by the Economist Intelligence Unit (EIU).“Capitalism has changed fundamentally,” says Jason Sumner, the senior editor of the report, in his summary of the results. Executives now want more regulation in the banking sector and beyond, the survey found. The […]

Long sighted

We are in the midst of the most severe recession since the Great Depression of the 1930s. This follows a long period of excess, where companies and individual consumers became increasingly leveraged. Of particular concern are the mortgage loans made to people who do not have sufficient income to repay these loans (the “sub-prime” loans).

Brexit Commentary from Natixis Global Asset Management

By David F Lafferty, CFA, SVP – Chief Market Strategist Thursday’s historic Leave vote in the UK will have both immediate and long-term consequences for the global economy and financial markets. The initial flight-to-quality reaction across asset classes has been exacerbated by the market’s misplaced confidence in a Remain victory leading up to the vote. Stock markets […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment