What it means
A trade association is a membership organisation that speaks for an industry. SIFMA represents securities firms, banks and asset managers on matters such as market rules, capital requirements and trading practices.
Its members include large global banks as well as smaller regional firms. SIFMA was created in 2006 when the Bond Market Association and the Securities Industry Association merged.
The combination gave the industry a single voice covering both the bond and equity markets. It has offices in New York and Washington, which reflects its dual role in markets and in politics.
Much of its work is advocacy. It writes comment letters on proposed regulations, meets legislators and regulators, and argues for rules that its members consider workable.
It also takes part in international discussions through affiliated bodies. For finance professionals, SIFMA is better known for its research and standard documents.
It publishes market statistics on issuance and trading, such as how much was raised by corporate, municipal and government borrowers in a given period. Its standard forms are used in bond and repurchase agreement markets, which saves firms from drafting the same contract terms repeatedly.
The association also runs conferences, training and working groups where member firms share practical problems. These forums often shape the details of how new rules are put into practice, long before they appear in a formal rule book.
Reading SIFMA material can therefore give an early view of where market practice is heading. When you see SIFMA quoted in a news story, remember that it represents its members' interests.
Its positions are often reasonable and informed, but they are not neutral, so they are best read alongside views from investor groups and regulators. Knowing who is speaking helps you judge the message.
In practice
Real-world examples.
Example
A compliance officer at a regional broker-dealer reads a SIFMA comment letter on a proposed trading rule. The letter outlines the cost to firms of changing their systems. She uses it to brief her own management on the likely impact and to decide whether the firm should send its own comments.
Example
A bond analyst at an asset manager uses SIFMA data to compare municipal bond issuance this year with the same period last year. The numbers show a rise in new sales. She includes the finding in her quarterly note to clients, and she cites the source so readers can check the figures.
Example
A treasurer at a company that borrows through repurchase agreements finds that the contract template his bank uses is based on a standard form published through SIFMA. Knowing this helps him understand the terms. He negotiates only the changes he truly needs and saves his legal budget for the points that carry real financial risk.
Case study
Seen in the real world.
Meridian Capital Markets is an illustrative, fictional mid-sized broker-dealer that learned a new settlement rule was being proposed by a regulator. The compliance director was unsure how it would affect the firm's costs.
She asked the firm's government affairs lead to review the industry's response and found that SIFMA had published a detailed comment letter and a survey of members. The survey estimated a typical cost of change for firms of a similar size, and it listed the main systems that would need to be updated, which gave her a ready-made checklist.
Using the survey, the director built her own budget of $400,000 for system changes and presented it to the board. She also joined a SIFMA working group, which gave her early notice of the final rule and a chance to ask practical questions. The illustrative lesson is that trade association research can save a small firm the cost of doing the same analysis from scratch.
Watch out
Common mistakes.
- Assuming SIFMA is a regulator, when it is an industry body with no power to make or enforce rules; the Securities and Exchange Commission and FINRA hold those roles.
- Treating its positions as neutral, when they reflect the interests of its members and may differ from the views of investors or consumers.
- Believing it covers only the United States, when it has affiliated bodies and takes part in international debates about how global markets should be regulated and standardised.
Questions
People also ask.
What does SIFMA stand for?
It stands for the Securities Industry and Financial Markets Association.
What does SIFMA do for members?
It lobbies on regulation, publishes market statistics and research, and develops standard documents and industry practices. It also offers training, events and working groups where firms can compare notes on practical problems.
When was SIFMA formed?
It was formed in 2006 by the merger of the Bond Market Association and the Securities Industry Association, which together covered both the bond and equity sides of the securities industry.
From the founder's library
Take it further with the book.
Build your financial confidence beyond this definition. Shihan's full-length guide, Accounting Fundamentals, takes the same plain-English approach and turns it into a complete, practical playbook for non-finance managers, business owners and students - with chapter-end quiz answers and presentation slides included.
25% off with code MMHQ25, applied at checkout. Priced in USD - checkout may show the equivalent in your local currency.
View the book and save 25%Related