ICMA responds to IOSCO Consultation Report on Pre-hedging
21 February 2025 ICMA welcomes the opportunity to respond to the IOSCO Consultation Report on Pre-hedging.
The response is provided by ICMA’s Pre-Hedging Working Group, which comprises sell-side, buy-side and market infrastructure provider members of ICMA’s Secondary Market Practices Committee (SMPC), and solely in the context of international, secondary bond markets.
Key points:
- ICMA members are of the view that existing code and guidance, such as the FX Global Code (2021, last updated 2024), and specifically the FMSB Standard for the execution of Large Trades in FICC markets (“FMSB Standard”, 2021) and FMSB Pre-hedging: case studies Spotlight Review (“FMSB Spotlight Review”, 2024) are sufficient for the markets they cover and that any further recommendations from IOSCO should be aligned with those existing codes and practices. Furthermore, ICMA members believe that no further prescriptive rules should be introduced as a result of any future IOSCO recommendations.
- Given the diverse nature of market dynamics and liquidity, asset classes, execution methods and investor sophistication around the globe, we believe IOSCO should provide high-level principles only and allow firms to tailor their internal procedures accordingly.
- Principle based recommendations will also make it easier to implement/consider across asset classes (e.g. equity v OTC markets) which are structurally different markets.
- Firms and other market participants should ensure that existing codes and guidance are applied consistently. In this context, and as highlighted throughout our response to this consultation, ICMA members would like to refer specifically to the principles and examples under the FMSB Standard and FMSB Spotlight Review. Further and more specific thoughts are provided in our response to the Consultation report
- With respect to the differentiation between execution channels, ICMA members would like to highlight that there should not be any bifurcation or unlevel treatment between OTC and electronic trading, referring also to the long-established principle of technology neutrality in regulatory action according to which, different media and channels should be treated equivalently.
Further thoughts and detailed comments on the consultation questions can be found in ICMA’s response.
