Retail bond: Difference between revisions
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(Add quote - source - James Leather MCT.) |
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They are generally issued in smaller denominations to facilitate retail-sized investments for trading, and unsecured. | They are generally issued in smaller denominations to facilitate retail-sized investments for trading, and unsecured. | ||
James Leather MCT writes: | |||
"In 2005, the Prospectus Directive came into being, with effect in the UK. | |||
The intention of this regulation was to protect retail bond investors by requiring dual disclosure - one for wholesale investors (which was 'lite') and one for retail investors (which was more onerous). | |||
The unintended effect of this regulation was effectively to exclude retail investors from the bond market, as investment grade issuers moved to wholesale issuance to avoid the more onerous retail investor disclosure requirements. | |||
Denomination sizes went from less than £2,000 for 67% of bonds in issue in 2005, to 3% in 2023 (with most denominations now being £100,000). | |||
In 2023, retail investors can only access investment grade bonds in the UK through funds - and have to pay management fees for doing so - often around 50 basis points. | |||
Since 2005, retail assets under management (AUM) have grown to approximately £2 trillion - and investment managers would like to be able to invest directly in investment grade bond issuance. | |||
Their wishes have been expressed through various channels such as the Investor Access to Regulated Bonds (IARB) Working Group (of which the ACT is a member). | |||
The FCA has released a consultation paper on the subject and a summary of responses (see "Other resource" below. | |||
The FCA reports that that respondents “almost unanimously” supported the removal of the dual disclosure prospectus standard in the bond markets, and outlined key next steps towards the facilitation of broader access to listed bonds for retail investors. | |||
For many treasurers and corporate bond issuers, this should provide access to an additional pool of capital (about £2 trillion), potentially of interest to issuers who wish to diversify sources of finance, deepen liquidity and reduce overall funding costs." | |||
== See also == | == See also == | ||
* [[Bond]] | * [[Bond]] | ||
* [[Green bond]] | * [[Green bond]] | ||
* [[Order book for Retail Bonds]] | * [[Order book for Retail Bonds]] | ||
* [[Retail]] | |||
* [[Secured debt]] | * [[Secured debt]] | ||
* [[Wholesale markets]] | * [[Wholesale markets]] | ||
==Other resource== | |||
*[https://www.fca.org.uk/publication/feedback/engagement-feedback-new-public-offers-admissions-trading-regime.pdf Engagement feedback on the new public offers and admissions to trading regime - Financial Conduct Authority - December 2023] | |||
[[Category:Long_term_funding]] | |||
[[Category:Long_term_funding]] | [[Category:Long_term_funding]] | ||
Revision as of 15:39, 18 December 2023
A retail bond is a bond designed to attract retail investors.
They are generally issued in smaller denominations to facilitate retail-sized investments for trading, and unsecured.
James Leather MCT writes:
"In 2005, the Prospectus Directive came into being, with effect in the UK.
The intention of this regulation was to protect retail bond investors by requiring dual disclosure - one for wholesale investors (which was 'lite') and one for retail investors (which was more onerous).
The unintended effect of this regulation was effectively to exclude retail investors from the bond market, as investment grade issuers moved to wholesale issuance to avoid the more onerous retail investor disclosure requirements.
Denomination sizes went from less than £2,000 for 67% of bonds in issue in 2005, to 3% in 2023 (with most denominations now being £100,000).
In 2023, retail investors can only access investment grade bonds in the UK through funds - and have to pay management fees for doing so - often around 50 basis points.
Since 2005, retail assets under management (AUM) have grown to approximately £2 trillion - and investment managers would like to be able to invest directly in investment grade bond issuance.
Their wishes have been expressed through various channels such as the Investor Access to Regulated Bonds (IARB) Working Group (of which the ACT is a member).
The FCA has released a consultation paper on the subject and a summary of responses (see "Other resource" below.
The FCA reports that that respondents “almost unanimously” supported the removal of the dual disclosure prospectus standard in the bond markets, and outlined key next steps towards the facilitation of broader access to listed bonds for retail investors.
For many treasurers and corporate bond issuers, this should provide access to an additional pool of capital (about £2 trillion), potentially of interest to issuers who wish to diversify sources of finance, deepen liquidity and reduce overall funding costs."
See also
