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TD Joins Fee-Free Zone

12 May 2005

TD Securities has joined a consortium of 13 banks that waive assignment fees on a reciprocal basis.

TD Securities has joined a consortium of 13 banks that waive assignment fees on a reciprocal basis. Investors cite the issue as one of the biggest impediments to increasing liquidity in secondary trading and there has been a campaign waged in the past year to remove fees from the market.

Credit Suisse First Boston, Citigroup, Deutsche Bank, Goldman Sachs, Wachovia Securities, Merrill Lynch, Scotia Capital, Lehman Brothers, Bear Stearns, Morgan Stanley, UBS and Bank of New York are also in the group.

"The primary goal of the consortium is to promote liquidity by tightening two-way markets," said Kevin Dooley, a senior par trader at TD. Dooley said the decision at TD was made for various reasons. But one factor is the desk has been re-vitalizing its trading effort with several hires in recent months. Dooley joined from Deutsche Bank at the end of March (LMW, 3/25).

CSFB's par loan trader Barry Zamore controversially kicked off a campaign to alter the landscape last year. Citigroup then made the offer last September to waive fees on a reciprocal basis. "I really applaud that [Citigroup] recognizes the current assignment situation is archaic, especially as they will be sacrificing a profit stream for the benefit of the asset class," noted Scott Page, a portfolio manager at Eaton Vance Corp., at the time (LMW, 9/24).

There are other holdouts, but JPMorgan and Bank of America are seen as the main targets since their new issue volume is so large. In their defense, the two also have to support sizable back-office operations. And B of A has reduced the amount of the fee from $3500 to $2500 for up to four sub-allocations on vehicles. After four deals there is a charge of $500 each (1/21). But with the average trade size decreasing and sub-allocations on the rise, pressure from the buyside has heated up. Spokespeople for JPMorgan and B of A declined comment.

12 May 2005