November 4, 2007
Arthur Levitt, Top Regulators and Industry Representatives Discuss: “Should Corporate Bond Pricing Transparency Be Applied to the Mortgage-backed and Asset-backed Markets?”
Question:
“Mr. Chairman you have been an advocate of maximum transparency as it applies to monetary policy. But, certainly the events of the last few months suggest that there has been an opaqueness about market information and what has been going on, even though we are an open credit market. What market and economic information which you do not already have, would you like to have in order to improve your decision making process at the Fed.”
Answer:
“I would like to know what those damn things are worth.”
Federal Reserve Chairman Ben Bernanke,
Economics Club of New York, October 15, 2007
The first major discussion of what can and should be done to address pricing transparency in the mortgage-backed securities (MBS) and asset-backed securities (ABS) secondary markets was held at IMN’s ABS East conference on Sunday, November 4, 2007.
Arthur Levitt, the former Securities and Exchange Commission chief who initiated major bond market transparency reforms in 1998, and Steven A. Joachim, the head market regulator of the current corporate bond reporting system at the Financial Industry Regulatory Authority (FINRA), joins other leading industry representatives in a discussion organized and led by Joseph Fichera, CEO of Saber Partners, LLC.
Accelerated by recent developments in the sub-prime mortgage market, industry participants are discussing the need for greater transparency both in the financial instruments, and also in secondary market pricing and trading information.
The corporate and high-yield bond markets use a system called the Trade Reporting and Compliance Engine (TRACE) administered by the FINRA in which all trades are reported within 15 minutes and publicly available. But should that system be extended to ABS? Are investors protected or hurt by transparency of actual sales and trading data? Will TRACE-like transparency in asset-backs hurt liquidity, put greater pressure on broker fees, or promote greater confidence and better pricing as it has done in the corporate bond market? Should the SEC take the lead in applying TRACE to MBS/ABS?
Related Media
- Listen to Panel Discussion
November 4, 2007
Play Audio
- Subprime Seizure Solution May Be in Hospital Bills
Bloomberg News/Businesswire, December 4, 2007
View Article - Could TRACE Bring ABS Pricing into Focus?
Asset Securitization Report, November 19, 2007
View Article - Levitt Says Asset-Backed Bonds Need Better Disclosure
Bloomberg News/Businesswire, November 5, 2007
View Article - Price Transparency (TRACE) Needed for ABS Market but Can’t Solve the SubPrime Problem
Bloomberg In Focus Interview with Joseph Fichera, July 12, 2007 View Video - View Journal of Finance
Article on TRACE, May 18, 2006Arthur Levitt, former chairman of the Securities & Exchange Commission.
Joseph S. Fichera, CEO, Saber Partners, LLC, organizer and leader of the panel and head of a corporate finance financial advisory firm.
Steven A. Joachim, executive vice president, Transparency Services, Financial Industry Services Regulatory Authority (FINRA [formerly NASD]), which oversees the corporate TRACE price transparency system.
Michael Decker, senior managing director, Research and Public
Policy, The Securities Industry and Financial Markets Association, which represents the brokerage community.Kumar Venkataraman, Associate Professor of Finance, Southern MethodistUniversity, and co-author of the first major study on the effects of TRACE/price transparency in the corporate bond market.
WHEN: Sunday, November 4, 2007 at 5 p.m.
WHERE: IMN’s ABS East Conference at the JW Marriott/Ritz Carlton Grande Lakes in Orlando, Fla.
