SEC Chairman Mary Jo White is asking regulators to improve the quality and transparency of corporate and municipal bond pricing made available to investors, according to a prepared speech released today.
White wants Finra and the Municipal Securities Rulemaking Board (MSRB) to work on two fronts: to ensure bond investors are getting the best trade executions possible and to help them better understand their transaction costs, according to a transcript released by the SEC of a speech White was scheduled to give today at the Economic Club in New York City.
“The development of a workable best execution rule for both the corporate and municipal bond markets is vital for the protection of investors and enhancing price competition,” White said.
To deter overcharging by brokers, she revealed the SEC is working with both agencies to develop stricter disclosure requirements by the end of the year for markups in “riskless principal” transactions.
Riskless principal transactions are when dealers buy and sell a bond or bonds at substantially the same price and time to fill two customer orders.
White noted transaction fees can have a measurable impact on the yield that an investor receives.
Targeting retail investors, she said the SEC is preparing an initiative to boost pre-trade pricing information for smaller bond orders through the public dissemination of the best prices generated by alternative trading systems and other electronic dealer networks.