America's bond markets are due for scrutiny--and competition
CURIOUSLY, bonds were the first products traded on the New York Stock Exchange (NYSE) back in 1792. It took the exchange 30 years to put the "stock" in its name. The exchange lost any significant stake in the bond business generations ago. Now, though, caught in a war over the cost of trading shares, the NYSE quite rightly is looking at other markets with fatter spreads. And its attention has settled on old haunts. It has begun talks with the Securities and Exchange Commission (SEC) over permission to trade thousands of unlisted corporate bonds.
The obvious attraction of the bond market is its size: some $10 trillion-worth of corporate bonds traded in 2003, a quarter more than the trading volume on the NYSE. And yet the bond market's size and maturity ought to mean that there are no rich pickings left. It has been hard, though, to tell how efficient bond markets are. In contrast to equities, information on the price of dealing in bonds has been scarce.
That began to change two years ago when the National Association of Securities Dealers began collecting transaction prices. This month the SEC released a study, based on these data, by its own Amy Edwards and Michael Piwowar, and Lawrence Harris of the University of Southern California. For all but the largest investors, trading bonds is many times more expensive than trading stocks. This is odd. In theory bonds should be no more expensive to trade than equities.
Even before sales commissions, the spread between what investors receive when selling $20,000-worth of corporate bonds and what they pay when buying is about 1.4%, or about one-quarter of a year's return. Costs are still higher in the convertible-bond market. And in the municipal-bond market, the spread reaches 2%, according to a similar study published by the SEC in the summer. All told, this is at least four times as expensive as a typical retail equity trade. The prices of most corporate bonds are reported soon after trading. But for the portion of the corporate-bond market where prices are still not required to be reported, a $2 trillion segment in 2003, the study reckons investors paid an additional $1 billion in trading costs.
When trades are reported through the NASD, according to the study, trading costs fall by 10% to 14%. And that is only a start, because the NASD system is glacially slow, reporting prices with a 30-minute delay. Meanwhile, only dealers know where the market is trading. With immediate disclosure, says Mr Harris, transaction costs would undoubtedly fall farther. The benefits, he notes, would not be just to investors but to companies, because lower sales costs would make their debt more attractive to buyers. Bond dealers have long resisted efforts to shine a light on their markets. The study indicates why. For the NYSE, opportunity knocks.
Economist; 10/16/2004, Vol. 373 Issue 8397, p70-70, 1/2p
bound market 债券市场
scrutiny n. 细阅；详细检查；仔细研究
New York Stock Exchange (NYSE) 纽约证券交易所
Securities and Exchange Commission (美国)证券交易委员会
National Association of Securities Dealers (NASD) (美国)全国证券交易商协会
haunt n. 常去的地方; (动物等的)栖息处; (罪犯等的)巢穴
pickings (pl) n. 外快，临时收入
all told 一共；总计
market n. 证券(或商品)的交易，买卖
shine a light on sth. v. 使某事清楚明白地显示出来
奇怪的是，早在1792 年，债券就是纽约证券交易所(NYSE)交易的第一个品种。纽约证券交易所用了30 年时间才给它起了个“