US banks push for delay in reporting corporate bond trades
Robin Wigglesworth, US Markets Editor
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.
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.
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.
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.
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