TSX Inc. has unveiled its plans to allow trading in sustainable bonds through its exchanges in an effort to improve access to these securities for investors.
The Toronto-based exchange’s proposals to begin trading in sustainable bonds — debt securities that are issued to finance projects for environmental and/or socio-economic benefits — were set out on Thursday in the OSC Bulletin.
Currently, investors can trade sustainable bonds on an over-the-counter (OTC) basis.
“This over-the-counter trading often involves a lack of transparency,” the proposal said.
Enabling trading directly on the TSX is intended to provide investors with increased access to these issues and greater transparency, the proposal said.
According to the proposal, the bonds would not be listed by the TSX, but would be posted for trading in the same way that alternative trading systems post listed securities for trading.
Trades would be executed and cleared through existing TSX and Canadian Depository for Securities Ltd. (CDS) infrastructure and processes.
“Given the expected retail nature of the sustainable bonds, bid/ask tick limits will be set tighter compared to TSX-listed stocks to protect market orders from executing too far away from the best price at the time of entry,” the bulletin said.
Additionally, the TSX will devote a section of its website to sustainable bonds and their issuers. Order and trade data will be disseminated through the TSX’s existing market data feeds.
To be eligible for posting, issues must be worth at least $75 million, and must be qualified by an independent, third-party environmental, social and governance (ESG) research and rating firm, among other requirements.
Trading is expected to start in the fourth quarter.
Comments on the proposals are due by July 27.