FSA to examine secondary bond market transparency

05 September 2005

The Financial Services Authority (FSA) published a Discussion Paper on Trading Transparency in the UK Secondary Bond Market which examines whether there is a need for the provision of greater pre- or post-trade price information in the secondary bond markets. The paper is designed to stimulate debate amongst market participants to enable the FSA to develop an appropriate policy in respect of trading transparency in the secondary bond markets, particularly in advance of the European Commission's consideration of the issue, expected to begin early in 2006. This paper does not propose any new rules in this area.

Hector Sants, FSA Managing Director for Wholesale Business, said:
'In developing our views we will look in particular at the current role of transparency, and whether there are any possible market failures caused by a lack of transparency in the UK and EU bond markets. We will also be seeking views on the practicalities of any regulatory change in this area.

MiFID will introduce, in April 2007, a comprehensive pan-European Union transparency regime for the trading of shares on EU regulated markets. Initially this will apply only to shares but the European Commission is required by the Directive to consider whether the scope of these requirements should be extended to other asset classes including bonds.

The FSA believes there is a need to establish in the first instance if there are any market failures in bond markets being caused by insufficient transparency which need to be remedied by new regulations.

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