A triangle of transparency

As the conversation around a consolidated tape for bonds heats up, Annabel Smith explores EU, UK and US plans to improve transparency regimes for fixed income.

There are undeniable synergies across the various revamps going on in the fixed income regimes across the world. Regulators appear united in their stance that when it comes to transparency for the asset class, something needs to change.

Formerly a world dominated by excel spreadsheets and voice trading, the makeover the fixed income world has gone through in the last few years has brought automation and electronification to the table. This has only strengthened the need for more data and more transparency, acting as a catalyst for participants’ cries for a consolidated data source.

As a typically off-exchange asset class, the fixed income markets are naturally more fragmented, containing instruments that range hugely in terms liquidity and price. For this reason, a consolidated tape is not only seen as more valuable in fixed income than in other asset classes but is conversely also harder to implement, due to the level of aggregation needed. 

This, alongside decades of regulators and participants butting heads over what they want from a tape, has led to a 20-year delay in the industry’s plans to implement one. However, following years of noise, it appears that the clamour for a tape in Continental Europe could be about to reach a crescendo, while the US is also making moves to shed more light on its own fixed income activities.

Making headway

In a Capital Markets Union (CMU) update put forward by European regulators in November, plans were hatched to introduce a single real-time consolidated tape provider for each asset class with mandatory contributions. 

In another update published in July this year, senior EU lawmaker and MEP Danuta Hübner said Europe, as part of its latest amendments to Mifid II, would be pushing through its consolidated tapes using a phased approach, beginning with a post-trade tape for bonds. A pre- and post-trade tape for equities was also included in Hubner’s July report. However, with exchanges up in arms about the damage to their revenues imposed by a real-time tape, the politics surrounding this proposal have the potential to put the brakes on it for a more extensive period of time. 

The UK has taken a largely divergent stance to that of Europe since its decision to leave the European Union in 2019, but one area where regulators on either side of the channel seem to agree on is the need for a consolidated tape. In an April response to its Wholesale Markets Review, UK legislators moved to follow suit by including slightly murkier plans for one or more consolidated tapes “for any asset class and for either pre- and post-trade data, or both”. Despite respondents expressing concern over multiple consolidated tape providers, HM Treasury outlined in its response that this would maintain competition in the space.

With much of the legislative process yet to be completed in Europe, it’s unlikely anything concrete surrounding a fixed income tape will be implemented before H1 of 2023 and as the UK is yet to even publish a consultation paper specific to a tape, it’s unclear if any changes will be made within the same timeframe. While the UK’s plans for a tape seemingly lack conviction of its European counterpart, it will be interesting to see how the two regimes compare to one another over the next few years.


Industry-wide debate over the specifics of what a tape should include and what properties it should have have led to decade long delays. The reasons behind these debates vary depending on the asset class. Politics has played a huge role in the progress made in plans for a tape in equities but for fixed income, it’s centred around undue risk. 

Bond trading is typically done on a risk basis and the range of instruments included within a tape, as well as the deferral times currently being debated for the wider realm of transparency in the fixed income markets (see our feature on fixed income deferrals on p.30 for more detail), have the potential to expose participants to undue levels of risk that could harm the interests of their investors. What’s more, without a significant aggregation process before the implementation of a tape, there’s the chance it could be pumped full of bad data that could render it useless.

“You need to make sure that you protect the risk providers of the trades and you ensure that undue risk is not created the market. That’s a very difficult balancing act when you have such a mix of instruments incorporated under Mifid. For example, if you’re trying to compare a benchmark on US treasuries, the most liquid bond in the world, to an EM [emerging markets] country which has a completely different liquidity profile,” Matt Coupe, director of cross asset market structure at Barclays and co-chair of the FIX EMEA regional committee, told The TRADE.

“If you had everything out there in real time then you’re going to have undue risk in the market. Conversely, if you have everything delayed for an extremely long period of time that’s also not going to enable price formation for the investor. We need to scope the instruments to a tighter group and then set some effective deferrals to make sure we can truly identify those big trades and have an appropriate time deferral configured to balance transparency and risk.”

Who will provide the tape in continental Europe is another debate still to be had. In recent months both TransFICC and Ediphy have thrown their hats into the ring, offering up their technology in the form of pilots for the industry to trial. 

The US

While plans for a tape in Europe and the UK reach boiling point, regulators on the other side of the pond have also moved to shine more light on the fixed income markets. Speaking at the City and Financial Global’s City Week 2022 conference in May, Securities and Exchanges Commission (SEC) Chair Gary Gensler made it clear that he now had his sights set on the fixed income markets, stating that greater attention needs to be paid to reforming them by the US watchdog, particularly as they become more electronic and potentially cause implications for financial stability.

The SEC published a filing on a proposed rule in May put forward by the Financial Industry Regulation Authority (FINRA) to expand reporting requirements for the Trade Reporting and Compliance Engine (TRACE) to include US dollar-denominated foreign sovereign bonds. The changes would alter the granularity and consistency of execution timestamps for the assets as well as the proposal for a reduction in reporting timeframes to the regulator. 

Gensler has also recommended FINRA to consider allowing the investing public to see TRACE data on individual treasury transactions – noting that this could help enhance counterparty risk management and the evaluation of trade execution quality. Alongside changes suggested by the SEC and Gensler, the US Treasury has also published a consultation paper, recognising the different liquidity patterns of each instrument and gauging the industry’s response to potential broader changes to the transaction-level details published on Treasury securities. 

“The European Union’s debt crisis, and more recently Russia’s invasion of Ukraine, have shown the value that regulatory reporting and public dissemination of foreign sovereign bonds would offer. FINRA has already consulted its members on this possibility, so I hope to see a filing soon,” said Gensler in May.

Mifid II already includes US treasury transparency in its regime, meaning European activity in the asset is already being printed. 

In light of electronification, regulators globally have decided more transparency in fixed income is needed. While the form that these changes take has not yet been fully decided, the triangular approach to shining more light on fixed income – if done correctly – will likely shake up the way these markets operate in a manner that could be beneficial for all.