BlackRock, a major competitor in the bond market with $4.3 trillion in client assets, urged changes including unseating banks as the primary middlemen in the market and shifting transactions to electronic markets. Another solution BlackRock proposed: reducing the complexity of the bond market by encouraging corporations to issue debt with more standardized terms.

Banks have retained their stranglehold on corporate debt trading despite years of effort by BlackRock and other large investors to eliminate their oligopoly. The top 10 dealers control more than 90 percent of trading, according to a Sept. 15 report from research firm Greenwich Associates. To BlackRock, the dangers of price gaps and scant liquidity have been masked in a benign, low interest-rate environment, and need to be addressed before market stress returns.

"These reforms would hasten the evolution from today's outdated market structure to a modernized, 'fit for purpose' corporate bond market,'" according to the research paper by a group of six BlackRock managers, including Vice Chairman Barbara Novick and the head of trading, Richie Prager, posted on the New York-based firm's website yesterday.