The Bond Market Association's distressed debt committee is asking for input from market participants on a recently released set of best practice guidelines for distressed debt trading. The committee is aiming for the guidelines to be adopted as standard market practice, which is why it is soliciting feedback from the industry beyond just its dealer members.
"The BMA wants to clarify what accepted market practices are," stated Michele David, v.p. and assistant general counsel. The distressed debt committee is open to feedback that could lead to expanding and rewriting the guidelines in the future. "Distressed trading practices are understood within the industry, but have not been put into specific guidelines before," she said, adding the set of uniform trading terms and guidelines is the first of its kind.
Specifically, David said the guidelines make more clear which party should receive interest payments in so-called flat trading, or when a bond is trading without accrued interest. The new guidelines say if any interest payment date occurs before the settlement date, the seller will get any interest paid.
The committee was formed last October in response to growth in the distressed bond market. Michael Carley, director at UBS, serves as chairman and Arthur Hahn, v.p. at Lazard, is vice chairman.