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Banks Brace for European Crackdown on Corporate-Bond Allocations – Bloomberg

battling-bribery-TRACE-podcastThe same banks that distribute the bonds also stand to profit when  investors come back to trade them, and regulators are concerned that allocation decisions can be influenced by the latter. ARTICLE
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  • Goose
    GooseSeptember 4, 2015"The 3 main pillars are the top 5 underwriters, large investors, and issuers. As commentary has stated, there is zero incentive and interest for two of them to change the structure. The US Treasury auction/primary dealer model shows that variations of the concept can work, depending on nuances of the market. Google ran an auction for their IPO, and there was plenty of hoopla around it. Here is a link to an interesting 10 year look back article from Forbes, http://www.f…"
  • Avatar
    CharlieSeptember 4, 2015"The premise of looking at primary allocation and ensuring fair and equitable distribution not to mention best execution for the borrower is an honorable objective. ESMA’s implementation timeline of December is worrying. Will we get a well thought through piece of legislation that is easy to implement and enforce? I have to agree with Mr Ewing of ICMA the present proposal is unworkable in a cost efficient manner and more to the point it compliance cannot be monitored i…"
  • Avatar
    JSeptember 4, 2015"Neither the banks nor the largest participants in the new issue business are incentivized to change it given the benefit both derive (large allocations with essentially guaranteed p&l along with higher fees than are likely to prevail in something more open and competitive). How would anything entrepreneurial really find enough support outside of external pressure?…"
  • Merlin
    MerlinSeptember 4, 2015"I like the idea of somehow changing the way that bonds get issued (assume equities has the same problem) but I don't like the regulators being involved. There have been a number of efforts over the years, I believe with the H & Q model having the most success in the prior decade (not sure if this system is still in operation, sorry to those running it if it still is!). Motivated issuers, dealers and buy side participants wishing to see a change can easily find qua…"
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Slider
8 years ago

I like the idea of somehow changing the way that bonds get issued (assume equities has the same problem) but I don’t like the regulators being involved. There have been a number of efforts over the years, I believe with the H & Q model having the most success in the prior decade (not sure if this system is still in operation, sorry to those running it if it still is!). Motivated issuers, dealers and buy side participants wishing to see a change can easily find qualified entrepreneurs to work with them to build this out. Yes, I include dealers… Read more »

J
J
8 years ago
Reply to  Merlin

Neither the banks nor the largest participants in the new issue business are incentivized to change it given the benefit both derive (large allocations with essentially guaranteed p&l along with higher fees than are likely to prevail in something more open and competitive). How would anything entrepreneurial really find enough support outside of external pressure?

Charlie
8 years ago

The premise of looking at primary allocation and ensuring fair and equitable distribution not to mention best execution for the borrower is an honorable objective. ESMA’s implementation timeline of December is worrying. Will we get a well thought through piece of legislation that is easy to implement and enforce? I have to agree with Mr Ewing of ICMA the present proposal is unworkable in a cost efficient manner and more to the point it compliance cannot be monitored in a scalable fashion. It strikes me that once again we have legislation that requires an audit trail that can be used… Read more »

Goose
8 years ago

The 3 main pillars are the top 5 underwriters, large investors, and issuers. As commentary has stated, there is zero incentive and interest for two of them to change the structure. The US Treasury auction/primary dealer model shows that variations of the concept can work, depending on nuances of the market. Google ran an auction for their IPO, and there was plenty of hoopla around it. Here is a link to an interesting 10 year look back article from Forbes, http://www.forbes.com/sites/jayritter/2014/08/07/googles-ipo-10-years-later/ The red meat for dear readers…”The second factor that lowered the offer price was the desire of the lead… Read more »