TMCnet News
TABB Examines ESMA Methodology to Meet European Regulators' Demand for Pre-Trade Bond TransparencyESMA has published its Regulatory Technical Standards (RTS) concerning pre-trade transparency for bonds requiring firms to make traditionally opaque processes transparent. To meet the European regulators' MiFID II demand for pre-trade transparency, traders now have three initial criteria to consider ahead of placing a trade: Is my bond liquid, which size am I trading in and how am I trading? While the RTS have yet to be endorsed by the European Commission, subject to approval by the European Parliament and Council, the regulatory direction is clear, explains Rebecca Healey, a TABB Group consulting analyst who wrote "Pre-Trade Bond Transparency: Understanding the MiFID II Maze," which breaks down the various constituents of the RTS to rovide a detailed look at the new obligations that will be required and what they will entail for all market participants globally. Adding to its significance is the fact that the regulation is emerging at the same time as profound change within the European fixed income markets. Investment banks are realigning capital to ensure they deliver a return on equity, changing products and services they are willing to offer clients, if not selecting which clients will be the beneficiaries. As execution ownership shifts to the buy side, how liquidity is formed and trades are executed will continue to evolve, driving buy-side firms to embrace automated workflows ensuring they can achieve compliance at point-of-trade. More automated flow and more data points will equal a reduction in information flow controlled by traditional bilateral trading desks. As a result, fixed income trading across Europe will slowly shift to a quasi-agency model from a capital-intensive, principal-based model. "Greater transparency in the pan-European bond markets is under starters' orders and the requisite innovation in technology to support this has only just begun," Healey says. On the sell side, the winners will be those that are lean and nimble, capable of creating automated, scalable business models, but she adds, "many fixed-income electronic platforms are far from where they need to be and investors still need to find and access liquidity." The 18-page, 6-exhibit report is available for download by TABB fixed income clients and qualified media at https://research.tabbgroup.com/search/grid. For the Executive Summary or to purchase the report, write to [email protected]. About TABB Group With offices in New York and London, TABB Group is the research and consulting firm focused exclusively on capital markets, based on the interview-based, "first-person knowledge" research methodology developed by Larry Tabb. For more information, visit www.tabbgroup.com.
View source version on businesswire.com: http://www.businesswire.com/news/home/20151120005138/en/ |
