lunes, 27 de abril de 2015

lunes, abril 27, 2015
April 26, 2015 1:10 pm

US banks push for delay in reporting corporate bond trades

Robin Wigglesworth, US Markets Editor

Wall Street©Dreamstime
 
US banks and asset managers are pushing for a delay in reporting big corporate bond trades as a way of avoiding a possible liquidity crisis, potentially setting up a battle with regulators keen to preserve transparency in the traditionally murky market.
 
US corporate bond transactions have to be reported within 15 minutes to the Financial Industry Regulatory Authority’s Trade Reporting and Compliance Engine, first introduced in 2002 to increase price transparency in the clubby world of debt trading.

Big investment banks have long chafed against the rule, arguing that Trace in fact makes it trickier to trade corporate bonds — especially big blocks of debt — as rivals quickly know when a large transaction takes place, and can rush to take advantage of such deals.

Banks are now being joined by some bigger asset managers, which say that even a small delay in reporting would improve the sharp downturn in bond market liquidity — a phenomenon that is causing alarm across Wall Street and among regulators.
 
“We are very supportive of a delay in reporting on large blocks,” said Richard Prager, head of trading at BlackRock, the world’s biggest money manager. “It’s the simplest and most elegant way of solving some of the liquidity challenge, with very little effort.”

Any delay in reporting bond trade prices to Trace would go against the post-financial crisis trend towards greater transparency and stricter regulation, and the fact that the subject is even being broached underscores just how worried the bond industry is about tough trading conditions.
 
“The common view is that transparency is always a good thing, but even a one-day delay would be immensely helpful,” the head of US corporate bond trading at one big bank said.

Lee Olesky, the chief executive of electronic bond trading platform Tradeweb, agrees that a slight delay in Trace reporting would help ease big transactions in illiquid markets. “We’re huge fans of price transparency, but if something doesn’t trade frequently, delayed reporting for larger-size trades could positively influence liquidity,” he said.

In a report on the investment banking industry released last month, Morgan Stanley and Oliver Wyman also aired the idea of delaying Trace reporting as a way of improving trading conditions.
 
“Immediate post-trade transparency requirements discourage large order transactions, as buyers that are uncertain of ultimate size become concerned about being run over,” the report said. A delay in reporting big bond trades “may give brokers the incentive to take reasonable risk to facilitate client flow”.

Mr Prager said the financial industry was still in discussions on how best to present its case for a delay, but Finra was likely to resist given the impact it would have on transparency in one of the already more opaque corners of markets.
 
A spokesman for the body said: “Finra is always willing to participate in a dialogue with market participants regarding the effect of transparency on market liquidity. We welcome industry feedback and take these discussions very seriously.”

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