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CommentLeader

HY investors should pay to parlay

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European high yield bond investors are up in arms at being asked to pay to be members of the European High Yield Association (EHYA), a division of industry body, the Association for Financial Markets in Europe (AFME). They should pay up, if not shut up.

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Investors have had free access to the EYHA for nine years. So being asked to cough up for the privilege now might seem odd. Up until now investment banks have footed the bill for an association that was meant to lobby on behalf of all market participants and facilitate better market practice for everyone. That is an awkward tradition to uphold.

If investors need an example of the association’s worth, one only has to look back a year. Investors expressed shock at the number of HY bonds being listed in the Channel Islands, as borrowers sought to dodge the red tape of the EU’s Market Abuse Regulation, leaving buyers fearing deteriorating borrower transparency.

AFME swiftly assembled underwriters, lawyers and representatives of the Channel Islands Securities Exchange and avoided the worst. Instead of market paralysis, the conversation kept flowing as did primary bond supply as an understanding was reached.

But often, investors have seen AFME’s high yield branch as a sell-side fog horn. Banks control the body’s board, and after all, he who pays the piper calls the tune, argue investors.

If investors are serious in their criticisms of the EYHA, this is their chance to do pipe up. Membership is a small price to pay for a voice within the association to argue with greater authority in wresting power back from the other side of the market This is vital after such a long spell of market conditions running in sellers’ and issuers’ favour.

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