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SEC Should Stem ‘Abusive’ Bond Dealer Trading Tactic, Panel Says

June 11, 2019, 6:39 PM

The SEC should deter bond dealers from using an “abusive” trading practice that hurts market competitiveness, an agency advisory group said June 11.

The tactic, known as “pennying,” describes a dealer sending a client’s request to sell a bond to the market and giving the customer the same or a slightly better price for it than the best bid out there. This use of “last look” in the auction process discourages competing dealers from making aggressive bids or even participating, according to the Securities and Exchange Commission’s Fixed Income Market Structure Advisory Committee.

The agency should state it disapproves of ...