This Bloomberg News story has been making the rounds and garnering a lot of feedback. Here is my take.

First, it is important to note that under the 1992 Government Securities Act, the SEC regulated the “physical” bond trading of U.S. munis and corporates on the alternative trading systems (ATSs) where Treasuries are traded. The news reports suggest that the SEC has an issue with price tiering – where some customers may receive preferential prices for same number of bonds. This appears to be similar to the concern that the SEC had with market makers in the OTC equity market (NASDAQ stock market) prior to 1996 Order Handling Rule.

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