The Nasdaq OMX Group Inc. recently announced that it will be launching a program pursuant to which it will disseminate pricing information on structured products using its Mutual Fund Quotation Service. There will be an initial fee for inclusion of a tranche of notes on the service.
Issuers and their affiliated broker-dealers may want to consider the advantages and disadvantages associated with this service. Given that regulators and the popular press regularly note that there is a lack of transparency in the market for structured products, the dissemination of pricing information may be helpful. This information may be helpful for distributors who sell notes offered by various issuers, as it will provide ready access to comparative pricing information. Funds and insurance company buyers may find it beneficial to have pricing information to permit them to mark their positions. Having such information regularly disseminated also may help in establishing that there is a two-way market for these securities for purposes of other regulatory requirements, such as Volcker Rule requirements. However, it also raises concerns if the pricing information is inconsistent with the estimated values ascribed to the securities at the time of offer, and if subsequent to that, the pricing information fails to reflect accurately the value of the securities. Moreover, pricing information may lead to confusion among investors, who generally should view products as buy-and-hold investments, if they are led to believe that these are securities with a liquid secondary market and may erroneously trade in or out of the securities.