The UK's Financial Services Authority (FSA) has published a discussion paper to examine whether there is a need for greater pre- or post-trade price information in the secondary bond markets.
Although the paper doesn't propose any new rules, the City regulator says the paper is designed to stimulate debate amongst market participants to enable it to develop an appropriate policy on trading transparency, particularly in advance of the European Commission's consideration of the issue, which is expected to begin early next year.
Hector Sants, FSA MD for wholesale business, says: "We will look in particular at the current role of transparency, and whether there are any possible market failures caused by a lack of transparency in the UK and EU bond markets. We will also be seeking views on the practicalities of any regulatory change in this area."
Sants says the paper will also ensure that the UK contributes constructively to the European Commission's review of whether the scope of MiFID, the directive on markets in financial instruments, should be extended to the bond markets.
MiFID, which is expected to be introduced in April 2007, will initially only apply to shares, but the Commission is considering whether the directive should be extended to other asset classes, including bonds.
The FSA says the review has also been prompted by other developments, including increased institutional activity as a result of long term investment funds reweighting their portfolios in favour of bonds. The International Organisation of Securities Commissions (IOSCO) has also stipulated that member country regulators assess the appropriate level of transparency for corporate bond markets.