The Committee of European Securities Regulators (CESR) will today publish its final report and feedback statement on the transparency of corporate bond, structured finance product and credit derivatives markets.
CESR stated that the current market-led initiatives do not provide a sufficient level of transparency.
The committee believes that an increased level of transparency would be beneficial to the market and that a harmonized approach to post-trade transparency would be preferable to national initiatives taken in this area on the basis of the flexibility allowed by MiFID. It plans to recommend the adoption of a mandatory trade transparency regime for the corporate bond, structured finance product and credit derivatives markets as soon as practicable.
"The recent market turmoil has highlighted the need for more transparency in the non-equity markets,” said Jean-Paul Servais, chair of the Belgian Commission Bancaire, Financiere et des Assurances (CBFA), chair of the CESR MiFID Level 3 Expert Group. “We think that it might be helpful in improving current market conditions, supporting liquidity in normal times and contributing to greater accuracy in valuations.
In the case of the ABS and CDO markets, CESR recommends that a phased approach would be used so that the post-trade transparency regime would gradually apply to all these bonds that are commonly considered as standardized.
With regards to ABCP, CESR came to the conclusion that additional post-trade transparency is not one of the pressing topics for participants in these markets. Therefore CESR does not currently see a need for a post-trade transparency regime for ABCP.
CESR is of the view that a post-trade transparency regime should cover all credit default swap contracts that are eligible for clearing by a central counterparty because of their level of standardization, including single name CDS, although there may not yet be an offer for clearing of these CDS by a CCP.
The post-trade transparency regime for structured finance products and credit derivatives should minimize any potential drawback on liquidity by allowing delays in or exemptions from the publication in a similar way as suggested for corporate bonds.