Friday, October 2, 2009

TRACE - The end is nigh...

...for your local, friendly flow desk's rich bid/ask spread. FINRA is pushing for structured products to go through TRACE. When this happened in corporates several years ago (2002), bid/ask spread dissipated and CDS replaced cash because dealers can apparently only make money using an opaque market where they can quietly rip your face off on trades.

"Anything that creates transparency in the market would be beneficial to pricing and valuations, as well as deal flow and trade volume," said James Grady, portfolio manager with Deutsche Asset Management in New York.

"Greater disclosure around these securities directly linked to the credit crisis will allow for more effective oversight with a deeper understanding of market dynamics," Ketchum said.

Don't know if it will increase deal flow or volume. It definitely would not have prevented the crisis in any shape, form, or fashion.

"The less transparency, the more profitable for the Street," said one market source, who spoke on condition of anonymity. "Greater transparency would lead to a tighter bid/ask spread and that means lower margins for the Street."


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