10.25.2017

BME Adapts Fixed Income Model

BME has adapted its Fixed Income market so that intermediaries and brokers can transfer all their operations to the regulated market and comply with the new disclosure and reporting requirements required by MiFID II – which will come into force in January.

The new legal framework streamlines the migration of bond markets to regulated markets, with greater and better information on each transaction and enhanced powers for supervisors. The main objective of MiFID II and the regulation that develops it, MiFIR, is to increase transparency, promote more orderly markets and improve the participants’ systems for reporting to supervisors.

“BME is prepared to offer market members and their clients the routing, trading and trade reporting services to ensure the best compliance with MiFID II in the area of Fixed Income,” said Jorge Yzaguirre, Markets Director of BME.

The securities listed on the main European Public Debt markets (Germany, Italy, etc.) will be added to BME’s Fixed Income market and will be grouped together with all securities admitted to trading on the Spanish market. All the issues made by the Spanish Treasury are already traded on BME’s regulated market with very narrow spreads, allowing the execution of trades from 1,000 euros. All this means the possibility of trading around 2,680 Fixed Income references.

For illiquid bonds, BME offers the option to operate based on expressions of interest. Once the transaction is closed, the customer receives confirmation and the market takes care of all the disclosure functions under the new regulation.

With these adjustments BME’s Fixed Income Market can cover the needs of the members and their clients so that they do not have to resort to the over the counter (OTC) market.

ANNEX: MiFID II NEW FEATURES FOR FIXED-INCOME MARKETS:

A new framework is established throughout the trading process, with the following new features:

Pre-trade: The regulation requires pre-trade transparency for Fixed Income volumes and prices, with some exemptions depending on the liquidity of the assets.

Trading: Traders face stricter requirements in order to guarantee the best execution of orders; there will also be greater oversight by regulators. The requirements are extended to systematic internalisers. A new Request for Quote (RFQ) system is established which allows market members to request information about liquid and illiquid securities.

Post-trade: Participants must report all relevant data about executed trades to the market. Increased reporting requirements.

Settlement: The BME Fixed Income platform has been adapted to T2S.

Source: BME

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