SEC COVID-19 Market Monitoring Group Update
May 19, 2020
Following inquiries about its work, SEC Chairman Jay Clayton and Chief Economist S.P. Kothari issued an update on the efforts of the internal, interdisciplinary COVID-19 Market Monitoring Group (the Group) formed by the SEC in April, and now the focal point for managing and coordinating the SEC’s COVID-19-related efforts. The update focuses on (i) the status of ongoing coordination with domestic and foreign regulatory partners and public sector officials, and (ii) certain market analysis work streams.
Domestic Engagement: Recognizing the importance of close and active coordination with other financial regulators and public sector officials, the Group has engaged in information sharing with domestic regulators and authorities “concerning risks and impacts resulting from COVID-19 on investors, companies, state and local governments and other issuers, and the financial system as a whole.” This includes work with individual agencies and participation in groups such as the Financial Stability Oversight Council and the President’s Working Group on Financial Markets.
International Engagement: The Group has also worked with foreign regulators and international prudential banking authorities on capital market-related matters arising from COVID-19, and has contributed to work streams organized by international organizations, such as the Financial Stability Board and the International Organization of Securities Commissions.
Public Engagement: The Group has received input on COVID-19 issues from market participants and the public and encourages additional submissions at COVID-19.Market.Monitoring@sec.gov.
Market Analysis Initiatives
Interconnectedness Initiative: In this initiative, the Group seeks to study significant channels of risk exposure and risk transfer in the financial system in order to identify areas of vulnerability and stability. It plans to examine certain segments of the markets and “identify which participants, activities and linkages act or function as the originators, transmitters, amplifiers, absorbers and ultimate owners of risk.”
Initiative on the Effects of Mechanistic Portfolio Management Guidelines/Restrictions: This initiative will study portfolio construction rules that are based on credit ratings and other third-party metrics. One example is “whether there is a potential for ‘pro-cyclical’ activities in the credit markets resulting from widespread mechanistic responses to credit downgrades.” The Group is consulting with a variety of experts and stakeholders, including investment advisers.
TAGS: Coronavirus, COVID-19, FSOC, Jay Clayton, Systemic Risk