Wall St regulator shines more light on some private bond trades

06/30/2014

By Sarah N. Lynch

WASHINGTON, June 30 (Reuters) - Wall Street's self-funded regulator on Monday began publicly reporting trade data for certain kinds of private corporate bond deals, in a move that will shed more light on a class of products that has operated largely in the shadows.

The Financial Industry Regulatory Authority's reporting initiative for some types of corporate debt trades followed new rules, effective last September, which lifted an 80-year-old ban on advertising for a variety of private securities offerings.

"We're excited to increase transparency in this opaque market. The information will help professional investors and contribute to more efficient pricing of these securities, as well as inform valuation for mark-to-market purposes," said Steven Joachim, FINRA's executive vice president of transparency services.

The post-trade price data that will now be made public on FINRA's website pertains specifically to private corporate bond deals offered to large institutional investors under a federal exemption known in legal parlance as "144A."

Private deals offered under the 144A exemption are not required to be registered with the U.S. Securities and Exchange Commission, a measure that helps reduce capital-raising costs.

Only large institutional investors who own at least $100 million in investable assets are generally eligible to invest in such deals.

Historically, information about private securities deals has not been readily available, compared with public offerings. That was partially because the SEC had rules in place that restricted public advertising about the deals.

The trend of offering less information, however, began to change rapidly after Congress passed the Jumpstart Our Business Startups (JOBS) Act - a law that aims to help ease restrictions on raising capital - in 2012.

The law required the SEC to permit public advertising for 144A deals and other kinds of private unregistered offerings.

Now such deals can be discussed in radio, television and Internet ads, though sales are still restricted to more sophisticated investors.

FINRA said retail investors will be able to access the 144A trading data online, starting July 1, through its Trade Reporting and Compliance Engine, known as TRACE.

In the first quarter of 2014, FINRA said 144A corporate debt deals made up 13 percent of the average daily volume in investment-grade corporate debt and 30 percent of the average daily volume in high-yield corporate debt.

Monday's announcement marked the latest in a series of recent actions by FINRA to shine more light on a variety of areas in both equity and debt markets.

Earlier this month, FINRA began providing data about trading volume levels at alternative trading systems like dark pools, a type of venue that lets investors trade anonymously.

In 2012 and 2013, the regulator also started to report on a variety of mortgage-backed securities.

Sometime next year, the regulator expects to start reporting on other types of asset-backed securities transactions tied to things such as credit-card debt and student loans. (Reporting by Sarah N. Lynch; Editing by Jan Paschal)



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