RBDA requests that Sifma stop recommending early bond market closings

By Jennifer Chiou

New York, Feb. 26 - The Regional Bond Dealers Association requested that the Securities Industry and Financial Markets Association end its practice of recommending early bond market closes on the business days preceding U.S. holidays, according to a letter from RBDA co-chief executive officers Michael Decker and Mike Nicholas.

RBDA said in the letter that early closings severely hamper market liquidity, which is particularly challenging in the face of the difficult credit conditions investors continue to encounter.

"Closing the bond markets early on the last business day before a holiday serves no useful purpose," Decker said. "In these unprecedented times, we need to do everything we can to improve market liquidity, not get in the way."

Sifma's holiday announcements typically recommend an early close at 2 p.m. ET, but, in its letter, RBDA points out many large firms are thinly staffed the entire day and liquidity generally tails off much earlier than the recommended hour.

Many dealers have defended the practice by saying they are simply following investors who exit the market early, according to a news release. The RBDA, however, said that it is the other way around; investors leave the market because the dealers are absent.

"Early closes create a holiday atmosphere with thin staffs and less-than-full trading operations even during hours when the markets are supposed to be open," added Decker.

The U.S. Treasury Department asked Sifma earlier this year to reduce the number of early closes, the release added.

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