In an article published in The Investment Lawyer, Partner Amy Doberman explains the history of cross-trading guidance and relief, the subsequent reluctance to adopt cross-trading and the eventual interpretive positions and statements that effectively ended cross-trading practices, among other topics.
Excerpt: “Cross-trading fixed income securities under appropriate circumstances would enable funds and their shareholders to save a substantial amount in transaction costs—by some estimates hundreds of millions of dollars annually. Indeed, by refusing to address this issue and provide clarity around permissible cross-trading, the SEC effectively shifts a substantial amount of revenue for securities dealers (and without any benefit to fund shareholders). This results in ineffective and inconsistent regulation, especially given the oblique permission to continue to cross-trade municipal bonds (given that UMB and Federated have not been withdrawn), which are often far less liquid and have less price transparency than many corporate bonds.”
