U.S. securities regulators are proposing to require brokerage firms to disclose the “mark ups/downs” that they charge on bond sales to retail investors.
The board of the Financial Industry Regulatory Authority (FINRA) approved a proposal on Friday that would firms to disclose the “mark up” or “mark down” on retail trade confirmations for most transactions in corporate and agency debt securities.
The proposal, which is subject to the approval of the U.S. Securities and Exchange Commission (SEC), aims to improve transparency to retail investors when trading fixed-income securities.
“FINRA has found that some individual investors pay considerably more than others for similar trades,” says Richard Ketchum, chairman and CEO of FINRA, in a statement. “Providing meaningful and useful pricing information will assist customers in monitoring costs, promote transparency into firms’ pricing practices, and help enhance investor confidence in the market.”
The proposal would require firms to disclose the mark ups/downs in trades where the broker trades the same security as principal with another counterparty that same day. It would not apply to transactions in fixed-price new issues, or in situations where the bonds are held by the firm longer than one day.