Debt markets cannot disclose something that doesn’t exist
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Opinion

Debt markets cannot disclose something that doesn’t exist

If Mifid forces banks to physically trade illiquid bonds they publish prices on, they won’t risk their capital.

It can be hard to generate a sense of urgency around the dry topic of securities regulation. It is doubly difficult when the implementation of new rules is delayed.

Recent comments from national regulators suggest that the deadline for firms to comply with the European Union’s Markets in Financial Instruments Directive (Mifid) might have to be put back to 2008. As Mifid recedes over the horizon again (there has already been one 12-month deadline extension), debt market practitioners need to remind themselves that Mifid is coming, and it matters to them as much as to the equity markets.

In fact, the European Commission has until April 10 this year to report to the European Parliament on the directive. This month, the EC begins reviewing Mifid’s Article 65(1). This deals with transparency in the bond markets. And senior figures at the EC indicate that they favour introducing a statutory requirement for transparency.

This should not come as a surprise. Despite the EC’s assurances that it will only regulate when there is evidence of market failure, the market suspects that regulators simply enjoy regulating. It’s what they do.

As one observer says: “Persuading a regulator not to regulate is a bit like persuading an alcoholic not to drink.

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