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Recognising the major shortcomings that have become apparent in the structured products markets the EBF does not believe that these could be usefully addressed through a post-trade transparency framework.
Responding to CESR’s consultation on the transparency of corporate bond, structured finance product and credit derivatives markets EBF members do not expect that a more formalised post-trade transparency regime would in any way alleviate the liquidity shortages and wide spreads that are currently observed in the fixed-income markets.
The EBF believes that the reluctance of market participants to trade in a wide range of instruments that has been experienced over the recent months is linked to uncertainty around the substance and performance prospects of certain sub-group of financial products, rather than a lack of trading information.
The EBF continues to believe that there is no case for any legislative measures, given that the necessary information is in principle available, it says in its response to CESR. Furthermore, there should be no pre-trade transparency arrangements which would indeed risk to further decrease liquidity as a result of their dissuasive effect.
Nonetheless, EBF underlines the differences between corporate bond markets, and structured finance products and credit derivatives markets. “In terms of traded instruments and market functioning, the differences are of great practical significance so that both markets should be analysed in separation from each other – and in separation from equity markets – as regards appropriate transparency levels and solutions”, the EBF notes. “These differences include in particular the degree (or lack) of product standardisation; liquidity levels; and market participants.”
The full response is attached below.