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Capital Markets

Should bond markets be more transparent?

The European Commission is considering imposing more comprehensive price disclosure on the bond markets. Michael Evans assesses the UK regulator's attempt to set the agenda for the debate

This article appears courtesy of International Financial Law Review

The UK's regulator is looking to shape the European debate on bond price transparency even before it begins, publishing a discussion paper on the controversial subject last month. The regulator is seeking the views of the UK industry ahead of a European requirement to consider extending disclosure rules for equities to the fixed income market.

The Financial Services Authority (FSA) paper asks whether rules in the EU Markets in Financial Instruments Directive (Mifid) on pre- and post-share trading price transparency should also apply to the bond markets. Mifid comes into force in April 2007, and when it does the European Commission will publish a report on whether or not the same regime should be extended to cover other asset classes, such as bonds.

Hector Sants, managing director for wholesale business says the FSA will take soundings on the practicalities of any regulatory change, and the UK regulator looks set to oppose radical reform.

"The FSA is trying to pre-position the debate on transparency," says Jonathan Herbst, a financial services partner at London firm Norton Rose. "The traditional market view is that the bond markets don't need the same disclosure levels as equities because the retail participation is lower.

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