The SEC Division of Economic and Risk Analysis ("DERA") issued a report on how Dodd-Frank and other financial regulations have impacted (i) access to capital and (ii) market liquidity.
The report contains analyses of recent academic work, as well as original DERA analyses of regulatory filings. The report is divided into two major parts: "Access to Capital – Primary Issuance" and "Market Liquidity." Highlights of the DERA report include the following:
Access to Capital – Primary Issuance
Primary market security issuance has not decreased since the implementation of Dodd-Frank regulations.
Capital from initial public offerings has "ebb[ed] and flow[ed] over time," and the post-crisis downturn is "broadly consistent with historical patterns of IPO waves."
The introduction of the JOBS Act brought an increase in small-company IPOs, and "IPOs by [emerging growth companies] may be becoming the prevailing form of issuance in some sectors."
Regulation A amendments, including an increase in the amount of capital allowed to be raised, resulted in an increase in Regulation A offerings.
JOBS Act crowdfunding provisions have allowed some firms to use crowdfunding to raise pre-revenue funds.
The private issuance of debt and equity increased significantly between 2012 and 2016, and amounts raised through exempt offerings were much higher than those raised through registered securities.
There is no evidence that the Volcker Rule has resulted in decreased liquidity, particularly with regard to U.S. Treasury Market liquidity.
Trading activity in the corporate bond trading markets has tended either to increase or to remain static.
The number of dealers participating in corporate bond markets has remained similar to pre-crisis numbers.
Dealers have reduced capital commitments, which is in line with regulatory changes, such as the Volcker Rule, that "potentially reduc[e] the liquidity position in corporate bonds."
For small trades, transaction costs generally have decreased; DERA suggested that this might be due in part to the emergence of alternate trading systems as platforms for trading corporate bonds.
For certain larger or longer maturity corporate bonds, transaction costs have increased since post-crisis regulatory changes.
DERA noted that it is difficult to quantify the effects of particular regulatory reforms, and that a variety of factors may contribute to market conditions.