Paula Dwyer , Columnist

Never Cross A Bond Dealer

Larry Fondren tried to demystify the market. Bad move

March 9, 1998 at 5:00 AM UTC

Paula Dwyer is a senior editor with the New York editing hub, focusing on daily and long-form enterprise. She was London bureau chief for Businessweek and Washington economics editor for the New York Times, and is a co-author of “Take on the Street: How to Fight for Your Financial Future.

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To many observers, the bond market operates much like a souk. There is no formal exchange, no central posting of bids and offers, no registry of trades once they occur. Hundreds of bond dealers trade more than $400 billion worth of securities a day over the telephone and by fax machine, and they thrive on the lack of public information. Investors, who have no way of knowing if dealers are quoting prices that have been marked up steeply, are at a disadvantage.

So when Berwyn (Pa.) entrepreneur Larry E. Fondren offered an electronic service that took some of the mystery out of the bond market and cut trading costs, he thought it would be a roaring success. Some players, though, didn't think it was such a good idea. Now, Fondren is out $10 million. His story could trigger closer inspection--and possibly major reforms--of the largely opaque bond market by Congress and regulators.