Jay Clayton, Chairman of the Securities and Exchange Commission, testifies at a Senate Banking hearing on Capitol Hill in Washington, U.S. September 26, 2017. REUTERS/Aaron P. Bernstein
November 28, 2017
By Lauren Tara LaCapra
NEW YORK (Reuters) – U.S. Securities and Exchange Commission Chairman Jay Clayton said on Tuesday that the SEC had formed a group to examine fixed-income markets with the goal of protecting retail investors.
Clayton, speaking at the Managed Funds Association Conference, said the SEC was looking at fixed-income markets with “greater focus” than in the past as such markets would look more like equity markets in coming years.
“Developments you’ve seen in equity markets in recent years, they are going to come to the fixed income markets,” he said, following a big push by retail investors into fixed-income products that have become less complex and easier to use.
Retail investors, scarred by the 2008 financial crash, have become risk-averse and poured billions into bond funds against the backdrop of ultra low yields.
U.S-based bond mutual funds and exchange-traded funds have taken in $2 this year for every $1 pulled in by stock funds, according to Thomson Reuters’ Lipper unit.
Clayton said the SEC was waiting to see how MiFID played out in Europe before implementing tougher rules in the United States. The long-running practice of paying for research through trading commissions is being upended by new regulations in Europe, known as the revised Markets in Financial Instruments Directive, or MiFID II.
Part of the sprawling MiFID overhaul will force investors in the European Union to pay for research directly. Global asset managers are expected to “unbundle” payments in other regions as well.
Clayton said the SEC would listen to feedback from big long-term investors on MiFID to see what rule set they like better.
“Hopefully we have a little bit of a Petri dish,” he said.
(Reporting By Lauren Tara LaCapra; Editing by Chizu Nomiyama and Andrew Hay)
