Bond price reporting is improving, but many brokers still hide costs.Bold

Let's face it: when it comes to the buying and selling of individual bonds, even the best financial advisors can walk away feeling like chumps.

    Compared to the stock market, the bond market can feel like the Wild Wild West-a landscape fraught with hidden markups and secretive deals, and a pricing dynamic that basically thrives on taking advantage of the little guy. Like buying a used car.

    "It's a completely different culture," says Sherman Doll, a CPA/PFS and partner at Capital PerformanceAdvisors in Walnut Creek, Calif. "Unlike stocks, you really don't know what you're paying. You're committed to give your best efforts to execute these trades for clients, and it's really tough."

    Like many advisors, Doll makes use of bond funds and, when the need for individual bonds arises, does his shopping through a third-party trader, BAM Advisor Services in St. Louis. "Before we used them, we didn't have a good solution," he says.

    There's no doubt that the bond market is opaque when it comes to pricing disclosures, but some changes are in the works that may provide a degree of clarity.

    Regulators, who have been pressing for bond pricing transparency for the past ten years, say new trade reporting requirements that are gradually being implemented and will be in full effect this year will provide investors with more timely trading information. The data, however, will fall short of being real-time reporting: Instead, it will provide investors with bond trades within 15 minutes of their execution.
    "It's not a ticker tape, but it's pretty close," says Christopher Taylor, executive director of the Municipal Securities Rulemaking Board (MSRB) in Alexandria, Va.

    Whether or not the increased reporting will dramatically help investors remains to be seen. Some observers note that, even after the reporting requirements are fully effective, the bond market will still not provide the type of clarity investors are used to in the equity market.

    Most notably, regulators have yet to put forth any proposals that force bond dealers to disclose their markups. The commissions still will be hidden within the prices of the bonds.

    The lack of a central repository for all bond transactions, with real-time reporting, also is viewed by some as a hindrance to investors. Some experienced bond traders say that even with a 15-minute delay, it will only be seasoned professionals who will be able to make use of the data streams.

    What is essentially needed, some say, is a bond market version of the New York Stock Exchange.

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