The gloves are coming off in the fight over exchange-traded bond funds. The fight, in case you missed it, is between ETF-giant Barclays Global Investors and new-born ETF Advisors. Both firms have paper work at the Securities and Exchange Commission seeking approval for the first bond ETFs, dubbed FITRs by ETF Advisors.

On August 29, Gary Gastineau, one of the founders of ETF Advisors and formerly the head of ETFs at Nuveen, sent a letter to Richard Chase, an American Stock Exchange vice president, laying out the battle lines.

In his letter, Gastineau claimed that Barclays is using its heft to pressure market makers to not do business with ETF Advisors.

He cites stories told him by two representatives of Spear Leeds Kellogg. The executives told of being pressured by Barclays to "not to serve as specialist for Treasury FITRs on the Amex." When they rebuffed Barclay's request, the market maker was warned that it would lose future business from Barclay's, claimed Gastineau in the letter.

ETF Advisors had considered also making complaints with other regulatory bodies, including the Department of Justice and the SEC. The theory being that Barclays is engaging in anti-competitive practices. It decided that the Amex was the best forum to turn to.

Barclays reports that it has been contacted by the Amex in regards to the letter, but says that it has done nothing improper.  

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