The European Securities and Markets Authority said that just 220 bonds are liquid enough to have to meet the pre- and post-trade requirements in new European Union regulations.

Esma today published its first liquidity assessment for bonds after analysing trading data for the first quarter of this year. The regulator found that only 220 bonds, out of 71,000, were sufficiently liquid to be subject to the real-time transparency requirements of MiFID II, which came into force in the European Union this year. MiFID II mandates post-trade publication of the price and quantity of trades in liquid bonds in real-time via approved publication arrangements (APAs). However reporting can be deferred for blocks above the large-in-scale thresholds , or above a size specific to the instrument.

The regulator said in a statement: “The quality of Esma’s assessment depends on the data submitted to Esma: the data received so far, for the first quarter of 2018, is not fully complete for most instruments. These data completeness and quality issues result in a lower number of liquid instruments identified compared to Esma’s earlier transitional transparency calculations.”

In December last year Esma published its transitional transparency calculations for fixed income using data from Trax, the MarketAxess subsidiary. At that time 566 out of 61,761 bonds which traded in the quarter ending 31 Oct 2017 met the liquidity thresholds.

Christophe Roupie, head of Europe and Asia for MarketAxess and Trax, said in December: “Only 157 corporate bonds out of 39,000 ISINs have been deemed liquid, demonstrating further the illiquid nature of the corporate bond market, and the need for alternative ways to source liquidity in those markets.”

Liquidity assessments will be updated on a quarterly basis. “However, additional data and corrections submitted to Esma may result in further updates within each quarter,” added the regulator.

Esma continued that it will co-operate with national regulators to address the poor data quality and will also work on making the publication process more robust.

Dan Davies, senior research advisor at Frontline Analysts, said:

Some of them haven't traded yet so they can't be sure how liquid they are

— Dan Davies (@dsquareddigest) May 2, 2018

Tasos Vossos at Bloomberg said:

"ESMA’s assessment of the European bond market for the first quarter of 2018 found 220 bonds (out of 71,000 for which the assessment was executed) to be sufficiently liquid to be subject to MiFID II’s real-time transparency requirements."

There's no good way to chart this… pic.twitter.com/7EcPVwwkQv

— Tasos Vossos (@tasosvos) May 2, 2018

The Association for Financial Markets in Europe said:

Pleased to see @ESMAComms publish its first liquidity assessment for bonds under #MIFID2 #MIFIR pre & post trade requirements https://t.co/3rSENX5lsg

— AFME (@AFME_EU) May 2, 2018

Panelists at the AFME European Market Liquidity Conference in London in March said the need to collect data from a number of APAs is expensive and cumbersome.

Juan Landazabal, global head of fixed income and foreign exchange trading at Deutsche Asset Management, said on the panel: “The landscape is fragmented and there is no more transparency than in November last year.”

Ashlin Kohler, fixed income market structure at Citi, agreed that the MiFID II data is not useful in its current state and the industry need to significantly invest in data analytics. She said: “Commercial solutions for a consolidated tape will evolve and more innovative vendors will emerge.”