WASHINGTON – The Securities and Exchange Commission is working to create a committee that will assess how well the country’s fixed income market is structured, SEC chair Jay Clayton said on Wednesday.

The new committee, called the Fixed Income Market Structure Advisory Committee, will be made up of a diverse group of outside experts who will be asked to give advice to the SEC on the regulatory issues impacting fixed income markets, Clayton said in a speech at the Economic Club of New York. The speech was his first as chair of the commission.

He did not specify whether municipal bonds would be included in the committee’s focus and a spokesperson with the SEC could not comment on that either.

“The time is right for the SEC to broaden its review of market structure to include specifically the efficiency, transparency, and effectiveness of our fixed income markets,” Clayton said. “As waves of Baby Boomers retire every month and need investment options, fixed income products, which are viewed as a stable place to store hard-earned money, will attract more and more Main Street investors.”

“Yet many of those investors may not appreciate that fixed income products are part of markets that differ significantly from the better-known equities markets,” he added.

SEC chair Jay Clayton
SEC chair Jay Clayton is pushing for a committee within the SEC to focus on fixed income market structure. Bloomberg News

Clayton also said he is “pleased” that the House Financial Services Committee’s subcommittee on capital markets, securities, and Investment is holding a hearing on fixed income market structure this Friday. Panel members are expected to broadly discuss the state of the fixed income market in the U.S., including increased deployment of technology, data transparency, and liquidity, according to a committee memo.

In addition to his plans for the new committee, Clayton reaffirmed both his commitment to ensuring the SEC carries out its mission with the long-term interests of the Main Street investor in mind and his desire to “continue deploying significant resources to root out fraud and shady practices in the markets, particularly where Main Street investors are most exposed.”

He also talked about the the SEC's responsibility to solicit and obtain public input on its rulemakings and activities.

“With respect to rulemaking, the SEC has developed robust processes for obtaining public input and is committed to performing rigorous economic analyses of our rules, at both the proposing and adopting stages,” Clayton said. “But we should not stop there. The commission should review its rules retrospectively. We should listen to investors and others about where rules are, or are not, functioning as intended.”

He added that it is “incumbent on the commission to write rules so that those subject to them can ascertain how to comply and … how to demonstrate that compliance.”

His remarks are sure to please muni market groups, several of which have complained about regulatory burdens in recent months.

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