News Release

NASD Bond Panel Urges Fuller Information, Access to Corporate Bond Market for Retail Investors

Washington, D.C.—With retail investors now responsible for nearly two-thirds of corporate bond transactions, a special NASD panel is recommending better information for investors before and at the time of every trade and increased disclosures on post-trade confirmations. In addition, NASD will dramatically increase investor access to corporate bond pricing information when its Trade Reporting and Compliance Engine (TRACE) launches its third and final phase on October 1.

Currently, TRACE publicly reports pricing and transactions on approximately 4,500 investment grade and high-yield corporate bonds within 45 minutes of each trade. Starting tomorrow, TRACE's public reporting will expand to approximately 17,000 bonds, and reporting time will be shortened to 30 minutes. By February 1, 2005, TRACE will publicly report transactions on all 23,000 corporate bonds, more than 99 percent of which will be reported within 30 minutes. On July 1, 2005, that reporting time will be shortened to just 15 minutes.

"Since it started operating in July 2002, TRACE has increasingly brought transaction price reporting in the corporate bond market into the daylight," said Robert R. Glauber, NASD Chairman & CEO. "With the final phase of TRACE about to get underway, real-time reporting of virtually every corporate bond transaction will soon be a reality. Retail investors, responsible for the majority of transactions in corporate bonds, are an important force in this market. The Corporate Debt Market Panel (CDMP) recommendations provide a roadmap to making the corporate debt market more transparent and truly accessible to retail investors."

"The corporate debt market has always been an important one for institutional investors, but it is now of increasing importance to individual retail investors who would benefit from additional guidance and disclosure," said CDMP Chairman John J. Brennan, Chairman & CEO of The Vanguard Group and a member of NASD's Board of Governors. "This panel has set the framework for a much better-educated consumer of corporate bonds."

In its report today, the 12-member CDMP - made up of industry experts representing a cross-section of the marketplace, who have been reviewing transaction methods, current regulation and market dynamics since March - issued a range of recommendations to better inform and educate individual investors about corporate bonds.

The CDMP concluded that the higher sophistication levels and greater resources of institutional investors make that investor segment a lower priority for near-term action. Individual investors should be regulators' immediate focus, the report says, noting that 65 percent of corporate bond transactions are in quantities of $100,000 or less in value - a size widely viewed as representative of individual investor activity. Nevertheless, the report says, individual investors know very little about how the bond markets work. It cited a recent NASD survey indicating that only 40 percent of investors understand that bond prices fall as interest rates rise. Another 34 percent either thought there is no fee for buying or selling a bond, or they did not know whether they were paying a fee for bond transactions.

"This panel is saying if you're a retail investor and you're buying a bond, here are the things that you need to know," said Doug Shulman, NASD's President for Markets, Services and Information, who served as the CDMP's vice chair. "Individual investors who prospered during the stock market's historic boom have now experienced major declines in equities and are looking for other places to put a portion of their money. As they approach retirement, millions of baby boomers are moving more and more of their assets from equity investments to fixed income investments. There is no doubt that the corporate bond market will only grow in size and in importance to individual investors."

With approximately $4.3 trillion outstanding, the corporate bond market is larger than either the U.S. Treasury market ($3.8 trillion outstanding) or the municipal bond market ($2.0 trillion outstanding).

The CDMP's complete findings and recommendations are contained in the Report of the Corporate Debt Market Panel, available at .

The CDMP's report and recommendations are being presented to NASD's Board of Governors, which will consider whether new rules or other regulatory reforms are warranted.

TRACE data is distributed by a number of media vendors and can be accessed on NASD's Web site at

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