TRADE BODY SETS NEW RULES FOR EURODOLLAR MANAGERS
The International Primary Market Makers
Association, a trade organisation, said its board last week
adopted new rules recommending lead managers of eurodollar bond
issues make a market in that security for 12 months.
    Currently, while there is an implied obligation on the part
of firms to make markets in issues they underwrite, there is no
formal obligation to do so.
    Christopher Sibson, secretary general of IPMA, in
explaining why the recommendation was adopted, said "It is aimed
at the problem of the lead manager who does a deal and
disappears."
    Sibson said the organization cannot force its members to
adhere to the rule. "We're under no illusions about the legal
binding force of these recommendations," he said.
    Lead managers have occasionally abandoned efforts to
support an unprofitable issue just a short while after it has
been offered, leaving investors and smaller firms with no one
to buy it back from them.
    Most recently, when prices of perpetual floating rates
notes (FRNs) suddenly plunged, most market makers abandoned the
securities altogether, leaving investors stuck with about 17
billion dlrs worth of unmarketable securities on their books.
     Sibson noted that the recommendation adopted by the board
only applies  to fixed-rate dollar issues and would not have
helped the floating rate sector out of its current crisis.
    Among other measures, the IPMA also decided that the
criteria for membership should be tightened to exclude some of
the smaller firms.
    Under the new rules, a firm must be the book running lead
manager during the two preceding years of 12 internationally
distributed debt issues denominated in U.S. Dlrs or in one of
eight other major currencies.
    The former requirement called for three lead-managed
issues. Sibson said he expects the tighter entrance
requirements to pare 3he current list of 67 members down by six
to 10 members.
    Smaller firms have criticized IPMA's efforts to restrict
membership to the larger firms, saying it is anti-competitive
and that it reinforces the big firms' already large market
share.
    "Belonging to IPMA carries a certain amount of prestige with
borrowers," said a dealer at a small foreign bank. "The borrower
says to himself, "Well I can travel economy or I can travel
first class,'" he said.
    Sibson defended the new rules saying "We have to steer a
course between representing the interests of the major market
makers and the less desirable goal of representing everybody."
    In any event, he said, the size of the market has expanded
to the point where the former minimum size requirements were
just too small.
    Also, IPMA members will be required to register with the
Association of International Bond Dealers as reporting dealers,
submitting daily information on prices on issues in which they
are market makers. The effective date of the rule has yet to be
determined.
    Dealers said that the rule would enable investors and
secondary market makers to better evaluate the appropriate
market price for their securities. Such a rule would make
investors more confident of trading in the eurobond market and
would increase liquidity, they said.
    Dealers said that the form of the reporting has not yet
been spelled out. But previous discussion of the reporting
requirement considered firms listing the closing price of a
given security as well as the high and low for the day.
     Members also agreed at the IPMA meeting on the
implementation of a new communications system which enables a
lead manager to invite all potential management group members
in to a deal at the same time.
 REUTER
