Any changes or alterations to MiFID II’s fixed income pre-trade transparency rules lay in the hands of the European Commission’s corporate bonds expert group.
Niall Bohan, head of the capital markets union unit for the European Commission told delegates about the expert group at the Association for Financial Markets in Europe’s (AFME) market liquidity conference in London this week.
He said the expert group will play a vital role in identifying potential unintended consequences of the rules and if it can formulate alternatives to certain rules, the Commission will address them.
“We will observe the impacts on the performance and functioning of bond markets and we are ready to use the expert group to process and respond to certain considerations,” he said.
The Commission established its corporate bond working group last year and its members include senior figures in fixed income from BlackRock, Union Investments, JP Morgan and MarketAxess.
The expert group is currently working on a corporate bond market liquidity study - to be published in September 2017 - and the Commission will respond to any recommended changes to policy.
Bohan added he does not expect any further delays to MiFID II implementation, even if the authority decides to alter rules before the January 2018 deadline.
“We’ve had a painful experience of delaying MiFID II which I don’t think will be repeated. We are already in discussion with the marketplace on liquidity and how we have approached pre-trade transparency, but I wouldn’t put a particular date on any changes.”
Bohan concluded: “When we are down to level two or three pace, we will have more opportunity to recalibrate and revisit specific, but we’d need a good steer and set of reasons to do that.”
Fixed income traders have warned pre-trade transparency rules under MiFID II will undermine already diminishing liquidity and no realistic solution to the problem currently exists.
If regulators do not step in, the buy-side has said it means end investors could lose out as price manipulation and information leakage could increase under the new rules.