April 11 Wall Street watchdog FINRA is taking a
broad look at the trading profits of banks and other middlemen
in some bond transactions to examine whether some money managers
are favored at the expense of other investors, the Wall Street
FINRA is crunching through reams of trading data, looking
for instances in which the middlemen have earned unusually large
profits on bond deals, the Journal said, citing officials.
The inquiry could lead to a regulatory instruction to the
banks to reduce the spreads between buying and selling prices
they charge on certain trades, or even to enforcement action,
the newspaper said. (r.reuters.com/jur48v)
FINRA is also investigating how banks apportion hot bond
offerings among investors, FINRA Chief Executive Richard Ketchum
said in an interview with the Journal.
FINRA is scrutinizing the profits banks and other dealers
make, known as markups and markdowns - the difference between
selling and buying prices, the Journal said.
In matched trades, where banks and other dealers join a
buyer to a seller, profits of more than 1.5 percent to 2 percent
would be "questionable," Ketchum told the Journal.
FINRA could not be reached immediately for comment outside
regular business hours.
The spotlight on bond markets comes as regulators have
launched several inquiries into potential inequities in the
stock and commodities markets, where elite groups of traders
have greater access to information at the expense of other
Last month, reports said that the U.S. Securities and
Exchange Commission launched an investigation into the
increasing number of complex bond deals on Wall Street that may
create new opportunities for fraud.
(Reporting by Supriya Kurane and Ankush Sharma in Bangalore;
Editing by Gopakumar Warrier)