In addition to the three primary market participants, there are a number of other involved parties in the primary bond market who provide essential services


Participants in Issuance Process

There are three primary participants in the primary debt market: issuers, investors, and dealers. Dealers offer their expertise and distribution capabilities to lead the underwriting process and connect the issuer with investors. The issuer and dealers also interact with a number of other market participants throughout the issuance process who provide essential services:

Rating Agency

A credit rating measures an issuer’s financial health, an indicator of its ability to meet its debt obligations. Credit ratings are an essential component to any go-to-market debt strategy and will enable issuers to capture a wider range of investor interest and deeper liquidity options. There are a number of private, independent credit rating agencies that offer credit rating services globally: Standard & Poor’s (S&P), Moody’s, Fitch, and DBRS. Although the agencies adopt differing rating scales, there is synchronicity across the scales. For example, an Aa1 rating from Moody’s is equivalent to an AA+ from S&P. In practice, issuers generally obtain and maintain one to three ratings to support their borrowing programs.


There are a number of agencies that regulate and oversee financial institutions and the financial markets. Each agency has a specific range of duties and responsibilities that enable them to act independently of one another. Prominent regulatory bodies include:

  1. Securities and Exchange Commission (SEC) – the SEC enforces federal securities laws and regulates the majority of the securities industry in the U.S. including public fixed income securities market, U.S. stock exchanges, options markets, and electronic exchanges among other markets. It also regulates investment advisors who are not covered under state regulatory agencies.

  2. Federal Reserve Board (FRB) – the FRB, or “Fed”, is responsible for influencing money, liquidity, and overall credit conditions of the U.S. economy. It mainly implements monetary policies through its open market operations, which control the purchase and sale of U.S. Treasury securities and federal agency securities. The Fed also supervises and regulates the banking system to provide overall stability to the financial system.

  3. State/provincial securities regulators – supervise and enforce regulations for securities trading activities and market participants within the regulator’s jurisdiction (e.g. Ontario Securities Commission, IIROC).

  4. State/provincial bank regulators – supervise and regulate chartered banks.

Legal Counsel

The issuer will retain independent legal counsel to represent them throughout the issuance process. Legal counsel will:

  1. Confirm that the issuer is legally allowed to issue bonds

  2. Confirm that the debt is a legally binding obligation of the issuer

  3. Ensure that the issue has been properly announced

  4. Ensure that the bond certificates have been legally printed

  5. Issue a legal opinion

The legal opinion is an assurance by the legal counsel to investors that the new issue is legally binding and that they may be legally offered for sale.


The trustee is a financial institution (e.g. commercial bank, trust company) that is given fiduciary powers by the issuer to enforce the terms of the indenture. The trustee is responsible for ensuring timely interest payments and protects bondholder interests if the issuer defaults.

Settlement Agent

After the new issue is priced, investors are given a short period of time (e.g. 3 days) to transfer funds to the issuer (settlement). A settlement agent ensures that the settlement occurs on the settlement date, so that the issuer receives the raised capital and the investors receive the fixed income securities.


The auditor is a professional accounting firm (e.g. Deloitte) that provides an assessment of the accuracy of the issuer’s business and financial records. They assure that there is no false or misleading information in the financial statements and prospectuses as dictated by the prevailing accounting standards (e.g. IFRS). The auditor may occasionally issue a comfort letter that assures the issuer’s financial soundness to investors.


The Role of Regulators and Professional Associations in Bond Markets

In recent years, regulators and professional associations have been playing a more important role in the bond market. With the objective of enhancing the integrity of bond markets, regulators such as the Securities and Exchange Commission (SEC) and the Canadian Securities Administrators (CSA) have taken various measures to make capital markets more transparent and fair. Also worth mentioning are efforts made by self-regulatory organizations like the Investment Industry Regulatory Organization of Canada (IIROC) and the Financial Industry Regulatory Authority (FINRA) to oversee members and their activities. In addition, professional associations including the CFA Institute, the Alternative Investment Management Association (AIMA), the Canadian Bond Investors’ Association (CBIA) have been instrumental in providing bond education and thought leadership to market participants. Also, there is a growing trend of collaborations among different organizations to better regulate the bond market.

Recent proposal made by FINRA that bond dealers be required to disclose markups on their retail bond sales, if approved by SEC, would positively impact the bond market transparency1. Similarly, in Canada, CSA released a set of proposals in September 2015 that aim to make public all trade information for corporate debt securities executed by dealers by the end of 2017. IIROC will also be involved to collect and analyze trade data as part of IIROC’s debt transaction reporting initiative with the Bank of Canada. In August 2016, CBIA expressed the concern that some regulatory changes which discouraged international dealers from facilitating secondary trades have been hurting market liquidity and Canadian bond investors’ ability to participate in certain deals3. Professional associations such as CFA and AIMA have equipped members with best practice and standards to foster a better bond market. Furthermore, the market insights section of those associations has raised awareness among market participants that it is important to establish a liquid, fair and transparent bond market. The article “ESMA Sets MiFID II Rules: Complex Balance between Transparency and Liquidity” published by CFA in 2015 is a case in point4.