Data Feed Aims To Boost Bond Transparency
Refinitiv has launched an aggregate data service for the European bond market as the Investment Association has said the lack of data is increasingly coming under the spotlight.
MiFID II, which came into force in the European Union this year, aimed to increase transparency in fixed income by introducing pre-trade transparency requirements and post-trade reporting through firms sending data to approved publication arrangements (APAs).
The regulation also extended the requirements to evidence best execution into fixed income for the first time but there is no EU consolidated tape similar to the US Trace reporting system for fixed income. Therefore, traders have to monitor prices across individual venues in Europe which increases fragmentation and cost.
Refinitiv, previously the financial and risk business of Thomson Reuters, has therefore launched an aggregate feed for the European bond market with data from APAs and multilateral trading facilities that clients can access in one place.
Douglas Munn, head of product operations – Elektron Real Time at Refinitiv, told Markets Media that the feed covers a large part of the market and there has been tremendous interest from clients.
Munn said: “Most clients we have spoken to want to use the data to address post-trade requirements such as transaction cost analysis and best execution.”
He continued that a time series of tick history could also be used to investigate opportunities for increasing returns.
“One of the most interesting things about MiFID II is that it is not just a European event,” Munn added. “We have clients who trade US Treasuries and Japanese government bonds who also want this data.”
Debra Walton, chief customer proposition officer, at Refinitiv, said in a statement: “MiFID data is providing greater transparency into the fixed income markets, creating new opportunities for the global financial community to identify new trading strategies, helping to ensure best execution for trades, and accelerating the shift to electronic trading and automation. However firms chose to use the data, they need to know they can trust the data to be consistent which is why having a single source of clean and normalized data to power their applications and workflow is so important.”
A previous commercial venture to launch a European consolidated tape, the Coba Project, failed in 2013 due to insufficient support from banks, fund managers, data providers and stock exchanges.
The Investment Association, which represents UK fund managers, said in a report this month that the availability of data on bond trades needs to be increased. One of the trade association’s recommendations was the development of a consolidated tape and another was that regulatory efforts need to be made to reduce market data costs.
“The lack of data has increasingly come under the spotlight, as under MiFID II asset managers are now required to demonstrate how they are achieving the best possible results for investors when executing bond orders,” said the report.
The association continued that as the bond market evolves and becomes increasingly digitalised, data should become more readily available – however changes are happening too slowly and are uneven, and data remains excessively expensive.
Galina Dimitrova, director of investment and capital markets at the IA, said in a statement that asset managers are concerned that the poor availability of data in the bond market is undermining transparency.
She said: “Our recommendations aim to improve the availability of data, which will ultimately deliver better returns for end investors.”
In addition to the lack of data, demonstrating best execution is also more challenging in comparison to the equities market, as it is less liquid and lacks continuous pricing. The IA said it is therefore recommending a more nuanced approach to best execution for bonds which is anchored in the context of the investment process.
The bank can act as a lead underwriter on renminbi-denominated bonds from foreign corporates.
Technology will be used to scale and to meet MiFID II 'best ex' rules.
Exchange operators says trading could start in 2019.
This year the exchange initiated the Green and Sustainable Finance Cluster Germany.
The partnership marks AxeTrading's entry into the German fixed income market.