In a comment letter filed yesterday with the U.S. Securities and Exchange Commission, the Securities Industry and Financial Markets Association expresses support for a New York Stock Exchange proposal to implement a new bond trading system, NYSE Bonds, that would replace its existing Automated Bond System.

The association says it believes that NYSE Bonds will benefit market participants, particularly retail investors and smaller institutions, by creating an alternative platform for trading fixed-income securities.

“We support NYSE Bonds because it will provide another means to access the fixed-income markets,” said Mary Kuan, vice president and assistant general counsel with SIFMA. “In addition, the new system may have a positive effect on transparency and market liquidity.”

The association’s letter also raises three concerns about the proposal. First, it requests greater clarity regarding the fee structure and ownership of data. The letter notes that the exchange will have a distinct competitive advantage as the exclusive processor of quote and trade data on NYSE Bonds and could therefore charge monopolistic prices for others to obtain it.

Second, it believes that the SEC should clearly outline the respective regulatory jurisdictions of the NASD and NYSE as it relates to NYSE Bonds. This will ensure that firms are not subject to unnecessary examination burdens, inconsistent requirements or multiple layers of fees for their activities.

Finally, the letter requests greater clarity regarding when trades will be deemed “clearly erroneous” and allowed to be broken or modified. In the letter, SIFMA recommends that objective standards be used since the current provision could allow legitimate and proper executions to be “busted” or adjusted.