In a press release on Wednesday, the FSA, the UK regulator, stated that there was no evidence of significant market failures relating to transparency in the UK's wholesale bond markets and there was therefore no reason to include these asset classes in the scope of MiFID's transparency requirements.
Based on the analysis set out in the feedback from a discussion paper entitled 'Trading transparency in the UK secondary bond markets', combined with discussions with stakeholders, analysis of existing empirical research and their own data analysis, the FSA does not see any evidence of significant market failures related to transparency in the UK's wholesale bond markets. Hector Sants, FSA Managing Director for Wholesale Business, said "Our analysis agrees with the majority of respondents that a combination of competition, market-driven transparency, the interaction between the cash and credit derivatives markets, and regulation that is either in place or in the pipeline seems sufficient, in general, to deliver efficient and fair markets."
Although recognising that not all agreed, the conclusions were that existing rules and the market pressures were enough to deliver efficient pricing and fair executions in the wholesale bond markets and that caution needed to be exercised in mandating greater transparency. The FSA also commented that there were very few direct UK retail participants in the secondary bond markets, a situation that is very different from some other EU Member States such as Italy and Germany which have a greater involvement by retail investors in the bond markets.
MiFID, the European Union's Markets in Financial Instruments Directive, is in the final stages of confirmation and is due to take effect from the 1st November 2007. Earlier in June, the European Commission launched a call for evidence on whether the scope of MiFID should include non-equity asset classes such as bonds.
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