Talk:TRACE

From Riski

Fear for corporate bonds trade Financial Times, Steve Johnson, July 19 2009

European corporate bond markets could be permanently damaged by attempts by regulators to improve transparency, many asset managers and traders fear.

Even the UK, German, Irish and Swedish financial regulators disagree with some of Cesr’s proposals, arguing the transparency regime should be applied only to more liquid corporate bonds.

The proposed regime would be similar to the Trade Reporting and Compliance Engine (Trace) system in the US that mandates immediate dissemination of many bond trades.

Yet even Cesr recognises concerns that Trace may have reduced liquidity and exacerbated the credit crisis in the US bond market.

Most of those contacted by FTfm voiced their opposition. Alasdair MacLean, investment director at Standard Life Investments, said: “I have spoken to people who have worked in the US markets and they don’t appear to be particularly happy with it, and that’s both the buyside and the sellside.

“If you are a large investor trying to exit a position, the fact that someone can see the trades more or less a they go through is potentially troubling.”

One large market-making investment bank said: “There seems to be a pretty general consensus view that liquidity, particularly for large institutions, has been hampered by the introduction of Trace.”

However, some are in favour. Robin Creswell, managing principal of Payden & Rygel Global, said Trace had reduced bid/offer spreads as well as improving transparency.

“Payden believes quite strongly that a post-trade reporting protocol is a good thing. If you look at any market where there is not price transparency, ultimately that affects the efficient allocation of capital,” he said.