The Association for Financial Markets in Europe (AFME) commented on the publication of the UK Financial Conduct Authority’s (FCA’s) policy statement for improving transparency for bond and derivatives markets.
The FCA model developed after active consultation with the market now better optimizes timely transparency, as well as facilitating the adequate protection of investors and liquidity providers from the very real risks associated with overly prompt dissemination of sensitive information for very large or illiquid trades.
AFME noted that the FCA’s revised approach to bond post-trade transparency is a vital first step on the road to a well-functioning and commercially successful consolidated tape (CT).
Victoria Webster, managing director of Fixed Income at AFME, said in a statement: “We support the FCA’s view that the UK’s new bond transparency regime will do much to assist price formation and proof of best execution while protecting the ability of liquidity providers to appropriately manage the risks they take when dealing in larger sizes and in illiquid bonds.
“We have long acknowledged that establishing the correct balances between simplicity versus nuance, and sufficient transparency versus adequate protection for market makers, is crucial for a successful transparency regime. We believe the FCA has made significant progress towards accomplishing this challenging task.”
The International Capital Market Association said in a statement the FCA policy is an important step in bolstering the UK’s infrastructure for the trading of domestic and international bond markets and in ensuring that London remains a leading center for global capital markets.
The success of the tape will hinge largely on the calibration of post-trade deferrals and the treatment of the most sensitive transactions, which are those in less liquid securities or very large size, and where the protection of both liquidity providers and investors is essential for market integrity.
“ICMA recognizes the data-driven approach that the FCA has taken in determining the optimal design for the transparency framework, while balancing this with a need for implementational simplicity. ICMA further appreciates the high degree of industry engagement which has helped to refine some of the regime’s more technical features.”
“ICMA looks forward to providing a more detailed assessment of the FCA’s proposals and – looking ahead – supporting a smooth implementation of the new transparency framework and the successful launch of a bond consolidated tape,” the association said.