Retail investors are likely to see about twice as much in "leakage" when buying and selling municipal bonds as they do for corporate paper, according to the WSJ, and regulators - who bypassed the municipal market while helping reshape how Wall Street works - have this asset class in its their sights.
"We spend an awful lot of time on the equities side of the market where spreads are counted in pennies - and in the muni market, spreads are counted in dollars," says SEC Commissioner Michael Piwowar.
For their part, brokerages say munis cost more because they trade in lower volume and for smaller amounts than other securities.
"You think of how the retail industry has gone from the local grocery store to Wal-Mart to Amazon," says a municipal bond wealth manager. "In municipal bonds, we're still shopping at the local grocery store."