Selling bonds is an infrequent exercise for most retail investors and even many institutional clients.
A vexing question for many is, “How do I know I am getting a fair market price for my bonds?” At many firms in our industry, the sale process is needlessly opaque and confusing.
Years ago we realized this as an industry shortcoming so we developed and implemented a transparent and cost efficient “bid wanted“ process. We believe this process is superior because it ensures the transparency and efficiency our clients seek.
Here is a snapshot summary of our process when clients sell bonds through our trading desk: Our trading desk will put your bonds out for bid on one or more of the available, nationwide, bid wire services ensuring your holding will receive nationwide attention. After a couple hours ‘on the wire’ the bids are reviewed and our trading desk may or may not bid the bonds.
The results are input to our bid template and then sent to the client for review. A sample of this template is shown below:
There are several things this transparent bid report reveals:
The number of bids each CUSIP receives.
The second place (or cover) bid and how far behind it is relative to the high bid. We often then add color as to what we think this means.
Whether or not Bernardi Securities, Inc, trading desk is bidding the bonds.
Our public mark–down schedule clearly enumerates our gross profit (your cost) we charge to run bid process for issues sold to the high street bid.
If the CUSIP has recently traded, the report shows if the received bids are representative of current market levels. Are the bids fair?
These are all valid and important questions and for these reasons we developed and implemented this practice several years ago.
Our goal is to make the sale process as transparent as possible. Given the arcane nature and many nuances of the municipal bond market, we believe our method provides excellent execution for our clients.
If you are thinking of selling or if you need price discovery for regulatory purposes, we ask that you call us and we can discuss our process in greater detail.
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