Participants in the market for bonds backed by mortgages and other debt will today receive a new set of guidelines to help them avoid falling foul of market abuse rules that came into force in Europe just over a year ago.
Two trade bodies, the European Securitisation Forum and the European arm of the Commercial Mortgages Securities Association, are aiming to describe best practice in information disclosure for the many inter-related parties attached to asset-backed securities deals.
The European Commission’s Market Abuse Directive has thrown up a raft of concerns and difficulties for the ABS markets because it contains no specific rules for these instruments, which are more complex and structurally very different from other public securities.
The guidelines follow hot on the heels of a joint communication from 12 leading trade bodies, including the ESF, about the use of inside information in credit markets.
But the process to produce them has taken more than a year and they are aimed as much at improving transparency in the market to aid secondary trading as at solving issues raised by MAD.
There are two significant difficulties for ABS markets related to MAD.
First, is the question of who out of the range of parties involved in issuing, managing and administering a deal is responsible for disseminating material information.
Second, is that investors in different tranches of a deal from senior to junior can receive different levels of information about the deal.
“None of these features was taken into account when the MAD was drafted,” said Rick Watson, head of the ESF.
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