FILS USA 2022: Will Europe become more transparent than the US?

Dan Barnes
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European including of government bonds within its consolidated tape, and a new joint venture amongst platform giants Bloomberg, MarketAxess and Tradeweb, could allow Europe to leapfrog the US in terms of market transparency. The disclosure of post-trade information within the US TRACE post-trade tape has to date been far more advanced than anything in Europe.

The first development in Europe was the announcement at the ICMA conference in Vienna that Europe’s tape would cover all bonds, not only corporates, which will mean that government bond markets are more transparent than in the US.

Danuta Hübner speaking to ICMA, Vienna on 10th June, from Poland.

“Currently the proposal seeks to improve the transparency regime, and also address data fragmentation,” said Danuta Hübner, MEP, ECON Committee, speaking at the event. “I am hoping that this will favour liquidity provision and also the national access to the European Union that are not markets, and what can be done [to enable this] This essentially focussed on two main measures. So we looked into the harmonisation of the rules on the federal rules.”

She continued, “We are looking also into introducing the post trade consolidated tape for all bond instruments. And on the deferrals the exact definition in the future will be the result of course of political negotiations between the courageous leaders and also some vested interests in the approach, at least on one side of these organisations, but I trust that the fragmentation of the current regime, which offers the national competent authorities today large discretion in establishing interim periods, will provide market participants which clear rules and therefore increased post-trade transparency.”

The second development occurred on 22 June, when Bloomberg, MarketAxess and Tradeweb Markets announced an initiative to explore the delivery of a consolidated tape for fixed income instruments in the European Union, with the intention to apply to become the consolidated tape provider (CTP) through the public procurement procedure, which the European Securities and Markets Authority, ESMA, will organise.

As the firms said in a statement, “With our collective expertise in fixed income markets and in operating regulatory reporting entities – notably Approved Publication Arrangements (APAs) for MiFIR reporting – we are in a unique position to deliver a reliable, efficient and cost-effective consolidated tape service that meets the needs of market participants and the objectives of the regulators. The consolidated tape service is expected to be provided – subject to the relevant regulatory approvals – via a joint-venture company established and operated independently from our respective businesses. If successful in winning the mandate, the company would be authorised and supervised by ESMA to provide transparency in fixed income markets pursuant to MiFID II. As a next step, we are preparing a competitive request for information process to review independent third-party technology and operating partner(s) for the consolidated tape service.”

Although Europe lags the US by nearly two decades in delivering bond market transparency, in time, if it does have the advantages of a wider range of instruments and improved technological partners, it may create pressure on US markets to do the same.

©Markets Media Europe, 2022
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