WASHINGTON Aug 1 Retail investors in the $3.7
trillion municipal bond market need better pricing information
before trades are executed, a top U.S. securities regulator said
on Friday in a speech calling for reforms for the lightly
"The municipal securities market has long suffered from a
lack of price transparency, and this deficiency is particularly
acute for retail investors," Securities and Exchange Commission
Republican member Michael Piwowar said in prepared remarks for
the Municipal Finance Conference in Boston.
"There is still a significant need for publicly available
information regarding pre-trade pricing for these financial
products," he said.
Piwowar's comments come as industry-funded regulators are
working to craft rules to improve transparency and investor
protections for the fixed income market.
The Municipal Securities Rulemaking Board, for instance, is
pushing to finalize rules that will require municipal bond
dealers to comply with best execution, something that is already
required of dealers in the U.S. equities market.
The MSRB will also be taking up proposals first advocated
by Piwowar in January. They would require dealers to disclose
how much they are compensated for executing so-called riskless
principal transactions, or buying securities from their
customers and reselling them to other dealers.
Piwowar said Friday that pre-trade price transparency could
improve through changes to federal rules governing "alternative
trading systems," an electronic marketplace where people can buy
and sell securities.
ATS operators for both equities and bonds are not required
to disclose pre-trade pricing data.
Piwowar said, however, that some "significant" ATS venues
should be required to start publicly disseminating prices for
some types of trades.
He added that he believed the rules could be drafted to help
shine a light on the market without running the risk of drying
For instance, he said, the SEC could start by only requiring
the disclosure of pricing data of small transactions by retail
investors. Larger trades, by contrast, could still be protected
from full disclosure.
"This is undeniably a delicate task, but the potential
benefit for retail investors is too great for us not to
undertake meaningful reforms in this area," Piwowar said.
Piwowar, who joined the SEC last year, has been among the
most vocal advocates for reforms in the municipal bond market.
Before becoming a commissioner, he once worked at the SEC as
an economist studying the bond market. His research found that
the high cost of trading in the market was linked to the lack of
In a June speech, SEC Chair Mary Jo White also threw her
support behind numerous reforms for the bond market, saying she
feared technology was being leveraged to make the "old,
decentralized method of trading" better for dealers, but not for
(Reporting by Sarah N. Lynch; Editing by Lisa Von Ahn)