Our members support the objectives of the MiFIR Review to enhance pre and post trade transparency in non-equity instruments. Our members believe that fully operative and genuine post-trade transparency provides significant advantages for both retail and institutional investors such as better, more reliable pricing, lower transaction costs and better liquidity across all trade sizes, including the largest sized block trades. We point to academic studies analysing the impact of the US TRACE regime for corporate bonds and the positive impact on competition and price formation yielded from real time price and volume publication. In this regard, we support a post-trade deferral model which prioritises real time publication of price and volume with deferrals of no longer than End of Day, with any longer deferral period only being made available in respect of truly exceptional trades by reference to size.
An ambitious transparency regime will also support the success of the European consolidated tapes for bonds and derivatives by providing meaningful data for publication. A successful CT will further support the growth, resilience and competitiveness of European capital markets.
Supporting evolution towards a more ambitious transparency regime will also aid European competitiveness. Other major financial markets are currently exploring significant reforms to enhance transparency. In the US, FINRA has recently proposed reducing deferral periods under the TRACE system applicable to corporate bonds from 15 minutes to 1 minute[1]. For further information on the positive impact the TRACE regime has had on liquidity and price formation in the US corporate bond market, please see our response to question 13. The UK has also recently consulted on material reforms to non-equity transparency which will make a far greater proportion of traded volumes subject to real time publication.
In this regard, it is important that consideration is given to ensuring there is not material divergence in transparency thresholds or deferral periods with a view to ensuring the respective EU and UK consolidated tapes function in alignment to effectively ameliorate regional liquidity fragmentation.
FIA EPTA members support the ambition and simplicity embodied in ESMA’s proposals regarding deferral periods and consider the data driven approach taken to calibrating thresholds has resulted in broadly sensible, pragmatic levels, subject to a few recommended adjustments addressed in our response below. We encourage ESMA to continue with this ambitious and data driven approach when undertaking their periodic review of deferrals as provided under MiFIR in order to realise the potential for more liquid and efficient non-equity markets embodied in the objectives of the MiFIR Review.
