British and European authorities are actively aiming to simplify bond liquidity and transparency regimes, but divergent reporting deferral rules for rates and credit, as well as European sovereign carveouts, will likely entice traders to arbitrage between jurisdictions to cover their tracks.
Since 1 December in the UK and from 2 March 2026 in the EU, credit and govies traders need to apply new liquidity assessment rules that impact their post-trade reporting framework. The European Securities and Markets Authority (ESMA) and the UK’s Financial Conduct Authority (FCA) have both set out to simplify how bond liquidity is assessed and how post-trade data is published. The resulting regimes diverge sharply on timelines and deferrals, particularly for sovereigns.
On the EU side, ESMA is focusing on simple, observable metrics.
“For sovereign bonds we’ve tried to keep the definition of ‘liquid’ as simple as possible, using data elements that are easy to identify: issue size, whether the bond has a fixed coupon, whether it’s an EU issuance or a different maturity,” says José Seabra, senior policy officer at ESMA. “We set clear issue-size thresholds so that above a level a bond is liquid and below it is illiquid, and we calibrate higher thresholds with shorter publication deferrals for the most liquid issuances so that a lot of activity is published by the end of the day.”
For corporates and other non-sovereign bonds, ESMA has also moved away from the liquidity tests that over emphasised newly issued bonds. Market participants agree this is a needed simplification.
Vincent Grandjean, founder and CEO at Propellant.Digital, told The Desk: “The EU regime is now simpler than before, but unfortunately some complexity remains, such as the possibility for sovereign bond trades to be reported in aggregate for up to six months. When you compare it to the UK, it’s still more complicated, at least in terms of the number of deferral options. Interestingly, you will certainly have these dual-reported scenarios where many trades are reported once in the UK and once in the EU, each to a different schedule and sometimes in a different format.”
The UK’s regime is built around a single, unified grid for bonds bucketed by issuer type, time to maturity, outstanding amount and size, with deferrals stretching from real time to three months.
The largest differences between the two regimes is in rates. For example, on a 10-year German Bund trade, dealers get a two-weeks deferral in the UK, but must report within 15 minutes in the EU regime.
Those differences matter because many trades will be “dual-reportable” across UK and EU entities or venues as dealers often trade back-to-back between entities in the UK and in Europe. In practice the post-trade transparency regime is therefore just whichever is shortest when it is UK firms trading with EU firms.
Within the EU, timelines are not fully harmonised. “There are two elements on deferrals,” says Seabra. “We have the standard deferral of four weeks, but each member state can authorise a supplementary deferral for its own issuances that can go up to six months.”
Grandjean is supportive of the direction of travel on both sides. “It’s definitely simpler, and hopefully we see local regulators in the EU take a balanced approach when deciding what supplementary deferrals to adopt for their sovereign bonds.”
That power could be used as a marketing tool for sovereigns seeking to offer investors more time in the dark – or as a way to tighten transparency relative to peers.
They will need to look carefully into their venue selection, execution policies and TCA before any transparency “arbitrage” becomes more than a talking point.
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