EU Bond Trading Disclosure Requirements May Be Reduced

The Financial Times recently reported that new rules in the Markets in Financial Instruments Directive (“MiFiD”) may be relaxed for bond trading in Europe. According to the article, MiFiD may be tweaked “to reduce disclosure around the price and size of bond orders, which would discourage trading especially when markets are moving fast.” The new standards under MiFiD II are still being finalized by the European Commission (“EC”), which “formally proposed a delay to MiFiD II’s implementation by a year to January 2018”. The standards go “beyond similar rules in the US by forcing certain over-the-counter quotes to be made public, as well as actual transactions.” The initial MiFiD proposal caused concern that “too much transparency could make it difficult to trade in a market already suffering from a lack of liquidity after banks have pulled back from market-making to reduce the amount of capital consumed by their trading arms.”

Christian Krohn, Managing Director at the Association for Financial Markets in Europe, said that “there is a lot of [discussion] going on to get a better result in the area of bond transparency generally, and there does seem to be some room for movement.” Last October, a number of members of European Parliament wrote to the EC “to raise a number of concerns with MiFiD II’s regulatory technical standards, including bond rules and commodity position limits.”

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