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Strategies & Market Trends : The Final Frontier - Online Remote Trading -- Ignore unavailable to you. Want to Upgrade?

To: TFF who wrote (8703)	1/30/2001 6:31:28 PM
From: LPS5	Read Replies (1) \| Respond to of 12617

It's funny that while we're discussing the maturation of the equity markets, the fixed income markets are filling up with alternative trading systems of several varieties, a small minority of which have a level of liquidity that is likely to attract more. I was at the Bond Market Association's "e-bond" conference here in NYC a few months back, and can can attest to the fact that every flavor of ATS, from limit order books to periodic crossing systems, auctions, and the like are being promoted as the next step in bond trading. Bond trading systems more than double in a year by Jonathan Stempel NEW YORK, Jan 30 (Reuters) - Investors who want to trade corporate bonds and other debt securities have more than twice as many electronic systems to choose from this year as they did last year, making it easier to get accurate prices in the largely opaque bond market, the Securities and Exchange Commission said. The SEC, which last week approved a trade reporting system that should make the $3.4 trillion corporate bond market more transparent, identified 34 "alternative trading systems" that trade debt in a recent report. There were 15 such systems in place last year, the SEC said. "We have witnessed growth not only in the number of debt systems, but also in the different types of debt instruments traded through these systems," the SEC said in the Nov. 27 report released Tuesday by U.S. Rep. John Dingell. Unlike prices on stocks and U.S. Treasuries, which are readily available to many investors, prices on most debt instruments are not widely disseminated in anything close to real-time. That can make it hard for some investors to be sure they are getting the best price. The SEC said there has been growth in the last year in the number of systems trading high-quality, junk and convertible corporate bonds, structured products such as mortgage-backed and asset-backed securities, and municipal securities. That increase "may affect transparency of the debt market," the SEC said -- that is, the ease with which investors can obtain prices and the size of trades. A few systems already allowing bond trading include BondDesk.com, Market Axess and TradeWeb. The SEC in 1998 set rules for alternative trading systems -- which are also known as proprietary, broker-dealer or electronic trading systems -- to promote fair market access. Not all such systems are immediately accessible to individual investors. Some companies, such as brokerage Charles Schwab Corp.(SCH.N) and mutual fund giant Fidelity Investments, are creating platforms to make it easier for individuals to trade. Dingell, a Michigan Democrat and ranking member of the House Energy and Commerce Committee, released the SEC report with a letter dated Tuesday. The letter went to outgoing SEC Chairman Arthur Levitt; Robert Glauber, chief executive of the National Association of Securities Dealers, which has 5,500 member brokerage firms; and Heather Ruth, president of The Bond Market Association, a trade group. It has long been a goal of Levitt to make the corporate bond market more transparent. To that end, the SEC last Tuesday approved for the corporate bond market the Trade Reporting and Comparison Entry Service, or TRACE. This system will eventually allow investors to get prices for many corporate bonds as soon as 15 minutes after a trade takes place. In 1999, the House voted 332-1 to order the SEC to improve the current system. "We heard testimony...that two investors buying the same bond at the same time from the same dealer can be given very different prices, differing by as much as six percent, a full year's worth of interest," Dingell wrote. "This situation is unacceptable and should not be allowed to persist." In a December 14 letter to Dingell, Glauber also acknowledged a "pressing need" for increased transparency. At the end of the third quarter, the mortgage-backed market totaled about $2.4 trillion, the asset-backed market about $804 billion, and the municipal market about $1.6 trillion, The Bond Market Association said.