‘Trust But Verify’ in Bond Market – Bloomberg
January 6, 2017 \ 8 Comments
Full Article: Bloomberg
The bond market is “closed off to you and me” and often involves shady practices and less-than-truthful information, Butswinkas said. Former President “Ronald Reagan’s saying ‘trust but verify’ would be an understatement,” he said.
My comment will likely jar with bond market dealers. You cannot lie. It is wrong. If you build a business from which you profit based on lies in a highly regulated industry you should expect punishment. Investors exercise their fiduciary duty based on the information provided by market participants if this is deliberately incorrect information you are hurting end investors. The truth is the cost of doing business. The “everyone does it defense” didn’t work for the LIBOR defendants; that outcome seems uncontroversial now. The way in which the bond market shares information needs reforming. Can you imagine a private… Read more »
There are good and bad in all industries, and when the bad outnumber the good, they invite regulator in to clean up the mess. When I began working on Wall Street, I was told that the foundation of a successful career was to remember that your word was you bond. Unfortunately, there were those in the industry that neglected their obligation to do what is right and took the short-term gains and laughed at those who followed their conscience. At the core of this discussion is the impact that information asymmetry has in any industry and whether or not one… Read more »
No one is lying about price, quantity or bonds. They are making up stories for story bonds…. 5 years in jail for that? Seriously?
Come on, people lie and have always lied in the bond market all the time. This is one of the reasons the corporate bond market is screwed up, you can’t make money anymore! Where is it written that a bond trader has to tell a client where he is buying or bought bonds? It is all about value and what someone thinks a bond is worth at a specific point in time. This has nothing to do with ‘everyone did it’, that seems like a dumb defense to me. How about ‘yes I misrepresented the cost of bonds to me… Read more »
I agree with Merlin. This, or shades of it, happen in every pool of commerce out there. You, Mr. Institutional Investor, pulled up your trusty Bloomberg, ran the bond with your own assumptions, and decided there was value in the security at the offer price. Your bad.
This is a complete and utter joke. This defense seems ludicrously stupid. I am pretty sure they got this defense from Animal House: “…You can’t hold a whole fraternity responsible for the behavior of a few, sick perverted individuals. For if you do, then shouldn’t we blame the whole fraternity system? And if the whole fraternity system is guilty, then isn’t this an indictment of our educational institutions in general? I put it to you, Greg: isn’t this an indictment of our entire American society? Well, you can do what you you want to us, but we’re not going to… Read more »
If he gets off, it would set an extremely bad precedence. Its time for the corporate bond market to head toward transparent pricing – yes you can’t make the kind of money you used to anymore if prices are transparent but it is what it is. There is no reason for this type of inefficiency in such an established market. The protocol can’t be you can just make up prices whenever you feel like it because ‘everyone does it’. Its ridiculous. Have we learned nothing from 2008?
What do you think market makers do if the don’t “make up a price”? Who/where do they get the price from? If someone else, how did the first person in the chain come up with the price?
All prices are “made up ” in that it represents what someone is willing to pay at a moment in time.
Blackrock’s Richard Prager: The Liquidity Is Out There – Institutional InvestorMarch 18, 2016
Everyone is Worried About the Thing Markets Need Most, But They’re Not Asking the Right Questions – Business InsiderMarch 25, 2016
US Companies Overpaying for Bonds; Banks May Be to Blame – ReutersMarch 31, 2016