Standardisation is crucial to improving efficiencies in bond issuance

New survey reveals concerns and potential solutions for market participants

Increased standardisation would have the biggest impact on efficiency in both pre-trade and post-trade bond issuance processes, a new survey from OMFIF’s Sovereign Debt Institute finds. This survey aims to better understand the challenges in bond markets and identify solutions through responses from those directly involved in the issuance process.

Respondents to the survey highlighted workflow processes as the biggest inefficiency in bond issuance, with over 50% of respondents selecting this as either the largest or second-largest inefficiency (Figure 1). This was followed by allocation and post-trade processes, chosen by 34% of respondents each.

Workflow processes are the day-to-day aspects of issuing a bond, including preparing documentation, which is still largely completed manually. ‘The whole bond issuance process is related to a huge amount of documentation. One way of improving this process is to agree on a common approach regarding electronical documents,’ said one survey respondent, adding that a further step would be to implement automated and electronic document flow.

Figure 1. Workflow processes are the most inefficient aspect of bond issuance

Which of the following is the biggest inefficiency in pre-trade processes? Share of respondents, %

Source: Future of bond market infrastructure survey 2023


Just under 60% of respondents highlighted the standardisation of legal documents as the biggest or second biggest area for improvement in pre-trade processes (Figure 2). Meanwhile, 55% of respondents selected the standardisation of order book processes and better price guidance from secondary markets was chosen by over 50%.

Standardisation of investor identification and classification was also a key area of improvement for post-trade processes, with 27% choosing it as the main improvement and a further 24% selecting it as the second biggest. Other improvements for post-trade processes include a fast settlement cycle and instant price discovery, chosen by 48% and 45%, respectively.

Figure 2. Standardisation would most improve inefficiencies

Which of the following would most improve efficiencies in pre-trade processes? Share of respondents, %

Source: Future of bond market infrastructure survey 2023


Despite the desire for a faster settlement cycle, there is a lack of consensus on what the settlement for syndicated bond issuances should be. The most popular selections were a settlement date of T+3 and T+2, chosen by 28% of respondents each. However, 25% said the settlement should be ‘variable’. Only 6% of respondents selected a settlement date of T+0 or instant settlement, reflecting the issues with real-time settlement that were discussed at the Public sector debt summit earlier this year.

The survey also analyses what improvements can be made to secondary bond market trading, with increased transparency and improved liquidity highlighted as the main issues by 77% and 69% of respondents. Meanwhile, the majority of respondents said they were not looking to adopt distributed ledger technology (71%) or artificial intelligence (86%) in their debt issuance. ‘Our market has not matured to the stage where considerations related to DLT and blockchain technologies are part of the future financial market developments,’ said a respondent.

While the digitalisation of bond markets is accelerating, concerns including operational and security risks were highlighted by respondents. ‘Technology would clearly result in more efficient collateral management arrangements but will definitely increase the exposure to operational deficiencies and vulnerabilities, such as technical settlement failure risk and cyber risk,’ said one respondent.

The survey on the future of bond market infrastructure features responses from 37 market participants, including 20 public sector borrowers from both the developed and emerging markets, as well as leading asset managers, central banks, investment banks and service providers. The results of the survey were revealed in full on 7 December with a panel of senior market participants.

Burhan Khadbai is Head of Content, Sovereign Debt Institute, OMFIF.

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