Two industry groups that represent “often opposing” sides of the investment industry say they have reached an agreement on UK post-trade transparency for corporate and sovereign bonds.
Saying the agreement united buy- and sell-side market participants, the proposal forms a joint response to regulatory consultation on transparency for bond and derivative markets.
The Association for Financial Markets in Europe (AFME), which represents capital markets actors, and The Investment Association (IA), which represents UK asset managers, announced the agreement on Wednesday (13th).
According to the two groups, their agreement builds on current Financial Conduct Authority (FCA) proposals and provides an “optimal solution” for the structure of the revised post-trade transparency regime in the UK.
The FCA has proposed two models in its CP 23/32 consultation paper.
Both have their strengths, said the two groups, but “neither represents the optimal structure”.
Broker-dealers in the modern post-trade financial landscape
Steps fund houses can take to prepare for US T+1
AFME and IA said they had taken the best elements from each of the FCA models and combined them into a hybrid framework.
The hybrid model includes two ‘large in scale’ thresholds and specific caps on the transaction volume that is published after a 4-week deferral. This is a mix between the two FCA models.
Galina Dimitrova, director for investment and capital markets at the IA, said the hybrid approach would offer timely transparency, while protecting investors and liquidity providers when executing very large trades.
The associations’ joint belief is that this hybrid model does not represent a radical departure from the FCA’s options but will lead to an overall better outcome than either of the FCA models individually.
Victoria Webster, managing director of fixed income at AFME, said: “Establishing the correct balance on a revised framework for the bond transparency regime is a difficult task, particularly given the often opposing views from different parts of the industry. Therefore, achieving alignment between our associations is a significant, and somewhat unique achievement, since it represents a coming together of the buy and sell side and, as such, we hope it will provide valuable input to the FCA’s decision making on the future UK post-trade transparency framework.”
