Comments on: Muniland is the most transparent bond market http://blogs.reuters.com/muniland/2011/07/01/muniland-is-the-most-transparent-bond-market/ Bridges, budgets, bonds Mon, 24 Nov 2014 00:29:08 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: BondBore http://blogs.reuters.com/muniland/2011/07/01/muniland-is-the-most-transparent-bond-market/comment-page-1/#comment-225 Mon, 04 Jul 2011 20:09:22 +0000 http://blogs.reuters.com/muniland/?p=1898#comment-225 Stating that one bond market is more transparent than another is a straw man argument. The real question is: are bond markets sufficiently transparent?

As a commercial entity (http://www.bondtools.com) trying to make use of available data, I have to point out while the EMMA facility is useful, two existing structural features of the municipal and corporate bond markets are blocking transparency in the bond markets:

i. Bonds are denoted for trading purposes using CUSSIP numbers. Use of these numbers are licensed by Standards and Poors (under an agreement with American Banking Association ABA) to third parties. My estimate based on S & P’s website is that it would cost 90K (US) a year to get a complete license for these numbers. Having a CUSSIP license is a requirement of any third party that would like to re-publish the information from EMMA. Imagine if every website with a stock quote had to pay a similar fee to use the ticker symbol.

ii. The over the counter (or dealer to dealer) nature of the bond market substantially impairs accurate price discovery, increases cost, and creates a conflict between the dealers and their customers. With the technology available today, the only reason not to move to a an exchange trading system are the profits to the existing players.

While these two structural issues exist, the lack of transparency means that the bond markets are not working in the interest of investors.

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