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SEC Chief Signals He Has Bond Trader Advantages in His Sights

Gensler first raised concerns about bond transparency in September, saying he’d asked the SEC staff to recommend ways to make the markets for corporate and municipal debt and mortgage backed-securities less opaque.

(Bloomberg) -- U.S. Securities and Exchange Commission Chair Gary Gensler signaled he’s interested in leveling the playing field in the corporate bond market by making key pricing information available to more investors. 

“Many professionals have access to some amount of pre-trade price information in the corporate bond market,” Gensler said in a Tuesday speech. “I wonder if broadening the dissemination of that type of information might make this market more accessible, competitive and liquid.” 

Gensler first raised concerns about bond transparency in September, saying he’d asked the SEC staff to recommend ways to make the markets for corporate and municipal debt and mortgage backed-securities less opaque. He reiterated that focus Tuesday in speaking virtually before the Securities Industry and Financial Markets Association’s annual meeting.

Read more: Gensler Turns Spotlight on How Hard It Can Be to Get Bond Prices

The U.S. corporate bond market is far less transparent than stocks, another big asset class that the SEC oversees. Since the 1970s, the myriad exchanges where equities change hands have been required to send all bids and offers placed by traders to a central database -- giving investors the ability to know at any moment the best available prices. 

There’s no similar pre-trade transparency mandate for corporate bonds, meaning investors often have to reach out to dealers one by one and ask for pricing data. Some private companies have sought to fix that information gap and make it less cumbersome, but there’s no industry requirement to participate.   

Read more: Goldman Alum Touts ’70s Era Fix to Bond Market’s Big Problem

Gensler has laid out one of the most aggressive agendas in the SEC’s 87-year-history, pursuing proposals that could affect a raft of public companies, hedge funds, stock exchanges and online brokers. He touched on several of his policy goals in his remarks before Sifma, including: 

  • Boosting transparency and competition for the Treasury market. Gensler said he wants to subject certain Treasury trading platforms to SEC oversight.
  • Toughening rules for equity markets. Gensler noted that the SEC is examining the digital engagement practices used by some financial firms to attract customers, payment for order flow and stock exchange rebates. He said the agency’s review could lead to two rule proposals, one for investment advisers and another for brokers.
  • The January market swings for GameStop Corp. and other meme stocks. Gensler said the SEC staff was looking at shortening the time for settling stock trades. “Given today’s technologies, I think certain functions could even take place on the same day, such as confirmations, allocations, and affirmations,” he said.

--With assistance from Robert Schmidt.

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