New York, Oct. 17 (Bloomberg) -- Tax-exempt bond issues sold by airlines dominate the ``100 Worst Trades'' compiled by quarterly MunicipalBonds.com.

The list, covering the third quarter of this year, spotlights transactions where the price disparity on a single day of trading exceeded 9 1/2 points. Topping the list were bonds sold in 1999 by Chicago's O'Hare International Airport for United Airlines. In July, some of the bonds were sold to a customer at 100 cents on the dollar. The same bonds were purchased from a customer for a little over 29 cents on the dollar.

This is the fifth time Kevin Olson, a former bond salesman in San Francisco, has put together a ``worst trades'' list on his web site. He put out the list for the first two quarters of this year and for all of 2000 and 2001.

Olson, an advocate for fair pricing in the municipal market, last month declared war on the bond industry with a lawsuit alleging that dealers routinely charge customers too much to buy and sell their securities. Olson envisions a role for his website as a central repository for pricing and other information. To be sure, he already has a lock on a whale of a domain name.

Lawsuit aside, municipal bond dealers don't have much use for the MunicipalBonds.com website because they say it makes them look like a bunch of crooks. They say most transactions in the municipal market don't feature big markups or markdowns. They don't typically sell bonds for 103, and buy the same bonds for a price of 55 cents on the dollar. Red-flagging atypical trades is unfair, they say.

Cautionary Tales
And yet Olson's not making this stuff up. His tallies are based on trades listed every day by the Municipal Securities Rulemaking Board and available on the Bloomberg and on the MunicipalBonds.com and InvestinginBonds.com websites.

Olson red-flags transactions that show a price disparity bigger than four points, and he usually comes up with a list of 20 to 40 of them from the thousands of daily trades.

Olson's lists, both daily and quarterly, showcase a variety of cautionary tales demonstrating what might be described kindly as instances of excessive wholesale and retail pricing -- as well as some simple mistakes in transaction reporting. Did someone really sell their bonds for 65 cents on the dollar? Or did a clerk type a ``6'' instead of a ``9''?

All this is the legacy of a market that for years lived the unexamined life. There was no price information available to the public, there were and remain no standards for markups, and dealers dictated all the terms. Prices were what brokers said they were. Is it any wonder there were some abuses?

The current system of price reporting was only put in place in the mid-1990s after Arthur Levitt was named chairman of the Securities and Exchange Commission. Levitt, who is now a director of Bloomberg LP, parent of Bloomberg News, demanded that dealers disclose their markups on so-called ``riskless principal transactions'' where they buy bonds specifically to sell to a customer. That refusal spoke volumes.

So does the current system, in its way. Those stories are told succinctly on the MunicipalBonds.com website.

No Surprise
This time around, instead of a freak show featuring the usual unrated and high-yield junk bonds, we have a theme: The swift collapse of the U.S. airline industry in the wake of the September 11 terrorist attacks on New York and Washington.

Airline or airport bonds are listed as 26 of the ``worst trades.'' Airlines usually have to sell taxable debt when they want to do things like build planes. They can sell tax-exempt bonds through airports to build hangars and gates.

Called ``special facilities'' bonds, there are about $14 billion of these kinds of securities out of the $74 billion in bonds sold by airports altogether, according to Mark Doyle of Sterling Grace Municipal Securities in Spotswood, New Jersey, who specializes in high-yield municipal bonds.

That airline bonds dominate the MunicipalBonds.com list this quarter isn't surprising. The airline industry hasn't been the same since September 11, which shut down the nation's airways for three days last year. Air travel dropped 22 percent after the attacks to the end of the year. So far this year, it's off by 6.2 percent over the same period last year.

Airline bonds had been trading at a discount all this year. They plunged after US Airways Group filed for bankruptcy on Aug. 11, and United Airlines said it was considering bankruptcy.

That's why in this list bonds sold by American Airlines, Delta and Continental are shown trading at prices all over the lot, from 30 cents through more than 100 cents on the dollar. Nobody really knows what they're worth. Some bondholders are so eager to be rid of them that they will sell them at any price. The buyers must be calculating the odds of bankruptcy.

This is logical. This makes sense, something not always on display in municipal market trading as depicted in the MunicipalBonds.com lists.

Check Data
Rounding out the ``worst trades'' list are 19 bonds sold for hospital or health care facilities, which is down from the 29 in the second quarter report, and six multifamily housing transactions.

There are industrial development bonds sold for paper companies, one for a skating rink, and another for a Tennessee boat builder. There are college savings bonds, sewer improvement bonds, turnpike revenue bonds, and even a few pretty straightforward general obligations.

As the latest list shows, sometimes there are some good reasons for wide price disparities. Sometimes there aren't.

How can bond buyers protect themselves? A good start would be by looking up bonds they want to buy and see how they've been trading. That's about as simple as it gets. If your broker objects, maybe it's time to look for a new broker.