Bond Trading is notoriously problematic even by Wall Street’s standards of never giving the investor an even break. Markups, Markdowns and commissions are arbitrary and capricious. The average retail investor simply doesn’t have the tools, insight, or economic clout to keep the brokerage houses honest. And, of course, you have to wonder why they would trust an institution that is simultaneously corrupt and incompetent. FINRA is dedicated to the protection of the traders at the expense of the investing public. They will enforce only enough regulation to keep the suckers coming back. Like Vegas, bond trading greatly favors the house.
Meanwhile, individual retail bond investors would get a far better deal by utilizing index bond funds by Vanguard, Transaction costs would be cut to a tiny fraction while purchasing a fully diversified portfolio with greatly increased transparency and total liquidity.
[The above was commented in response to: The Intelligent Investor: Are Your Brokers’ Fees Excessive? The Financial Industry Regulatory Authority, which oversees the brokerage business, is seeking to modernize decades-old standards for transaction costs. To read the article please click here.]