Trade reporting and compliance engine europe
Everybody wants it, somebody should build it, anybody could build it, yet nobody wants to pay for it. Undeterred by the non-existence of an equity tape nine years after MiFID came into effect, the European Commission EC has determined that a consolidated tape should also be provided for fixed income instruments under MiFID II, the expanded and reinforced version of the directive set to take effect in January A post-trade price tape can have considerable value for fixed income trading. The enormous range of issued bonds — reflecting multiple tenors and the dispersal of refinancing by corporates — makes finding liquidity more difficult.
MiFID - non-equities market transparency: the ECB’s perspective
Everybody wants it, somebody should build it, anybody could build it, yet nobody wants to pay for it. Undeterred by the non-existence of an equity tape nine years after MiFID came into effect, the European Commission EC has determined that a consolidated tape should also be provided for fixed income instruments under MiFID II, the expanded and reinforced version of the directive set to take effect in January A post-trade price tape can have considerable value for fixed income trading.
The enormous range of issued bonds — reflecting multiple tenors and the dispersal of refinancing by corporates — makes finding liquidity more difficult. Consequently, price discovery is more difficult. The limitations on a lot of the current models is that they look for comparable bonds by reference data attributes.
They run out of gas pretty quickly. The effect of TRACE, which began to be phased in from , was not only an improvement in price discovery. The study also found that transparency caused a significant reduction in price dispersion, supporting the goal of price discovery.
However caution is needed to mitigate negative effects. The most fundamental point the provisions address is that all market participants must publish trade reports through standardised Approved Publication Arrangements APAs.
OTC data should then be more easily organised and normalised by consolidated tape providers, of which the EC expects there to be several, in competition with one another. All security and administrative oversight sits with local NCAs while ESMA has tasked with developing draft regulatory technical standards for data formatting and functional, which include the identification of additional services that a CTP could perform to boost market efficiency.
With so much yet to be determined the potential providers of consolidated tapes, such as MarketAxess and Bloomberg, are reluctant to talk on the record. Consequently, there is no certainty that one or more providers of a tape will come forward. There is a very real chance that they will have to come back on this one. Clearly the US and Europe are very different markets; having a tape run by a regulator in a similar model to that of the US is not what has been intended, however a single tape may end up being the default model.
Regulators take different views on subjects such as block trades, and if you are on one side of that it is good to have somebody on your side. Your email address will not be published. So why is it so difficult to get RegTech projects off the ground?
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Events Awards People Podcasts Videos. Browse by Category. Twitter ateaminsight regtechinsight tradingtechins datamgmtinsight. Share article. Same problem, different asset With so much yet to be determined the potential providers of consolidated tapes, such as MarketAxess and Bloomberg, are reluctant to talk on the record.
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We have also learnt important lessons from the US experience with the Trade Reporting and Compliance Engine, or TRACE. This is a reporting. The Trade Reporting and Compliance Engine (TRACE) is the FINRA-developed vehicle that facilitates the mandatory reporting of over-the-counter secondary.
Recent numbers crunched by the European Securities and Markets Authority ESMA estimate that a mere bond instruments out of 61, were sufficiently liquid to fall under the new pre- and post-trade transparency rules. The majority are sovereign bonds while only out of 39, corporate bonds were labelled as liquid. Those that meet the liquidity thresholds have to publicise their prices to request for quote RFQ in real time, and post-trade the execution time, venue, ISIN, price and notional have to be disclosed as near to real-time as possible. Their illiquid brethren are under no obligation to make their pre-trade quotes public and post-trade reporting can be between two days or up to four weeks depending on the national regulator. Moreover, there are many different moving parts in the reporting landscape.
Unlike stocks, which generally trade transparently on public exchanges, corporate bonds and structured products trade "over-the-counter", meaning they are private transactions between individual counterparties, and so the transactions were generally not publicly reported.
It is a pleasure to be here today at this public hearing organised by the European Commission EC with such a distinguished audience and in the company of such notable speakers. Since , market practitioners and regulators have been extensively debating the implications of enhanced trading transparency for non-equity financial instruments, especially corporate bonds.
