Bond Fee Disclosures Would End 38-Year Debate

SEC is currently 'very focused' on improving visibility in the bond market.

After a 38-year debate on how to make trading costs for corporate and municipal debt transparent, regulators are making another attempt at forcing dealers to disclose how much they earn on the transactions.

The Municipal Securities Rulemaking Board will discuss a proposal at the end of the month, Executive Director Lynnette Kelly said yesterday, after U.S. Securities and Exchange Commission (SEC) Chair Mary Jo White asked the regulator to come up with a plan by year-end. The new rules would apply to so-called riskless trades, where firms fill client orders rather than use their own money to opportunistically buy.

The agency issued the most recent proposal in 1994 and didn’t adopt the rule in part because regulators were readying the bond-price reporting system now known as the Trade Reporting and Compliance Engine, or Trace, which went into effect in 2002.

Regulators are more confident they’ll follow through this time because a majority of the five-member commission—White and two Republican SEC commissioners, Daniel M. Gallagher and Michael S. Piwowar—have called for requiring disclosure.

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