LONDON, March 10 (Reuters) - The European Union’s markets watchdog has proposed making it harder for traders to obtain “waivers” from transparency rules for bonds.
The bloc’s MiFID II securities rules introduced just over two years ago sought to increase transparency in fixed income trading nearer to levels in shares.
The European Securities and Markets Authority (ESMA) said on Tuesday that the overall level of transparency remains limited due to so many financial instruments benefiting from exemptions that turn “real-time transparency into the choice of last resort”.
“ESMA is proposing to move to the next stage in terms of gradually increasing the transparency for bonds,” the watchdog said in a statement.
Its public consultation paper was also targeting “improvements” specifically for commodity derivatives.
Many market participants had warned that increasing transparency in bond trading would crimp the market.
But these fears have not materialised and market participants are now saying that transparency has suffered due to too many “waivers” from the rules being handed out for instruments that are deemed to be “illiquid”, ESMA said.
“Accordingly, these stakeholders recommend classifying more instruments, in particular bonds and interest rate derivatives, as liquid in order to become subject to pre-trade transparency,” ESMA said.
Waivers that are complex to apply and supervise could be scrapped, ESMA said.
The watchdog will use feedback from the public consultation to come up with recommendations for the European Commission for amending MiFID II, which is undergoing a broad review.
Final changes could need legislation approved by the EU member states and the European Parliament.
Reporting by Huw Jones, editing by Ed Osmond