The bond market has radically improved in price and trading disclosure over the past 35-odd years but remains fragmented and in need of more disclosure, according to John (Jack) Brennan, chairman emeritus and senior advisor of The Vanguard Group.
Speaking at the Financial Industry Regulatory Authority’s Fixed Income Conference in New York, the former Vanguard chairman said the bond market would benefit from better transparency beyond what is available today on electronic platforms like the Bloomberg terminal and what has been disclosed by TRACE (FINRA’s Trade Reporting and Compliance Engine), which covers corporate bonds, Treasuries and agencies as well as asset-backed securities.
TRACE, which was first implemented in 2002 and has expanded its coverage in recent years, “is not perfect and should be assessed regularly but has it has been transformational in instilling confidence in the market,” said Brennan. “It entices more people into the market, new players who add liquidity and are trusted.”
Under TRACE, every trade in the bond market must be reported to FINRA within 15 minutes of pricing.
“Transparency begets liquidity which begets trust, which in the end is what we all should be striving for,” said Brennan.