European bond markets are still waiting to experience the benefits of the second Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR), a report from the International Capital Market Association (ICMA) found.
The report highlighted that while the European bond markets continue to function, MiFID II/MiFIR is yet to deliver on its objectives of improved investor protection, greater transparency, and a more competitive landscape.
One of the main objectives of MiFID II/MiFIR was to encourage more trading on regulated venues rather than in the over-the-counter market, and there is evidence that this has been the case, ICMA noted.
However, ICMA suggested that the liquidity and market functioning appear to have been maintained in the wake of regulation despite ongoing issues.
These issues are particularly related to the transparency regime and the accessibility and quality of pre- and post-trade data.
While it is accepted that this will improve over time, the implementation of MiFID II/MiFIR seems to have missed an opportunity to provide a utility based consolidated tape for fixed income, ICMA revealed.
Martin Scheck, chief executive of ICMA, said: “Despite the resource commitment to meet the obligations of MiFID/MiFIR, our members, both buy and sell-side, are not yet seeing the benefits of this regulation although they do understand that it will take time for the many challenges to be addressed and for benefits to accrue.”
Scheck added: “Data quality and accessibility were cited as particular concerns. ICMA and others continue to work with the authorities and market participants to help harmonise approaches and improve the effectiveness of the regulation.”
