ESMA looks to “phase-in” MiFID II transparency rules for bonds

Rules on transparency for non-equities should be “phased-in” to reduce risks to liquidity, ESMA said.

Transparency rules for bonds under MiFID II should be phased in to ease possible liquidity risks to bond markets, the European Securities and Markets Authority (ESMA) has said.

Under the “phased-in” approach, transparency rules will initially be “less demanding” so fewer instruments will be subject to real-time transparency regulations once MiFID II rules apply, ESMA said.

ESMA explained: “Under the Commission’s proposal, the regulatory technical standards (RTS) would only specify the criteria applicable for the first stage of the phase-in and ESMA would conduct a yearly liquidity assessment.”

ESMA and RTS would be adjusted should the rules negatively impact liquidity.

Current rules on transparency “result in no meaningful improvement of transparency for many non-equity instruments” and would “create legal uncertainty” to all involved.

ESMA also proposed to “adjust the liquidity status of newly issued corporate and covered bonds by increasing the issuance size thresholds”

ESMA is also seeking to introduce a methodology for calculating caps on commodity derivatives under MiFID II, “in order to ensure a harmonised approach” to applying the limits.

The European regulator asked the Commission to also define which contracts traded OTC are considered economically equivalent to contracts traded on venue.

ESMA sent the proposed changes to the European Commission on its request, and a decision will be made on whether to endorse the changes.

In May, The Trade will be holding a series of events in London, Paris, Frankfurt and Stockholm, examining the key issues buy-siders need to consider in their MiFID II planning.

For more details and to register, click here.