European Bond-Trading Platforms Partner on Regs

Shanny Basar

Four fixed income trading platforms have launched the Electronic Debt Markets Association Europe as bond markets in the region face a slew of new regulation and rules which rely on market data on an ongoing basis.

BrokerTec Europe, MarketAxess Europe Limited, MTS Group and Tradeweb Europe launched EDMA Europe last week with membership open to all market participants that meet the established minimum criteria.

David Bullen, secretary-general of EDMA Europe, told Markets Media: “There is a crescendo of regulations, including MiFID II, which will affect market microstructure and there was a lack of a place for fixed income venues to escalate their concerns.”

EDMA Europe said it will allow its members to develop collective views on regulatory developments affecting electronic fixed income trading venues in Europe. The Association’s primary aim is to promote the collective views of its members which include open access and fair, effective and appropriately transparent markets; diversity of electronic trading protocols for fixed income markets to suit the range of instruments and different needs of market participants; and equivalent regulatory treatment of all electronic trading platforms and a consistent European regulatory approach.

MiFID II regulations, affecting European financial markets from 2018, introduce new pre-trade and post-trade requirements for fixed income markets and also looks to define liquid instruments. For example, bonds will be assessed every quarter to determine liquidity  on an instrument by instrument approach and liquid bonds will have higher transparency requirements. In addition, the pre-and post-trade transparency requirements will also depend on whether trades are defined as large-in-scale.

Amir Khwaja, chief executive of analytics and research firm Clarus Financial Technology, said in a blog: “For a market with tens of thousands of securities, with high volumes in specific issues and a long tail for many others, this transparency will have a profound impact and be interesting to say the least.”

Bullen said the association’s members can provide market data to the regulators which can they can use when deciding where to set, for example, the large-in-scale thresholds.

“Data will need to be produced on an ongoing basis by member firms and EDMA Europe can co-ordinate standardisation,” Bullen added. “Using the wrong data is like a pilot trying to land at Heathrow airport with the wrong dashboard.”

Miranda Morad, general counsel for MarketAxess Europe and chairperson of the regulatory affairs steering committee of EDMA Europe, said in a statement: “The shared expertise and resource among the EDMA Europe member firms is helping create consistency and agreement on industry-wide issues facing multilateral trading facilities, and ultimately the investor and dealer clients of MTFs.”

MiFID II also extends best execution requirements from equities to other asset classes, including fixed income, and will require dealers to provide more evidence to their clients on how they tried to achieve best execution.

“A high quality dataset is needed for transaction cost analysis,” added Bullen. “The sophisticated TCA dashboards used for equities cannot just be plugged into debt markets.”

Bullen continued that EDMA Europe will work with other trade associations. “We will co-operate on consultations and requests for information and focus on providing data from our membership,” he added.

John Edwards, managing director, said in a statement:  “We are excited about being a member of this new trade association that will focus on representing the electronic debt markets in Europe, concentrating on regulatory policy and market structure issues that are important specifically for companies operating MTFs, like BrokerTec Europe. We are enthusiastic about working closely with our competitors on these topics to help shape the future for us as an electronic trading platform in these markets and for the benefit, experience of all our customers.”

More on MiFID II and bond trading:


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