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CESR to set out rules for improving transparency in non-cash markets

10 July 2009  |  5114 views  |  0 EU building, Brussels

The Committee of European Securities Regulators (CESR) has recommend the adoption of a mandatory trade transparency regime for corporate bond, structured finance product and credit derivatives markets "as soon as practicable".

In publishing its report, CESR says that current market-led initiatives have not provided a sufficient level of transparency. The agency argues that an increased level of visibility would be beneficial to the market and that "a harmonised approach to post-trade transparency would be preferable to national initiatives taken in this area on the basis of the flexibility allowed by MiFID".

Jean-Paul Servais, chair of the Belgian Commission Bancaire, Financière et des Assurances (CBFA), states: "The recent market turmoil has highlighted the need for more transparency in the non-equity markets. We think that it might be helpful in improving current market conditions, supporting liquidity in normal times and contributing to greater accuracy in valuations. CESR has been closely following the progress of the market-led initiatives, but after careful reflection has drawn the conclusion that they have not provided a sufficient level of transparency."

CESR thinks that a post-trade transparency regime for corporate bonds should cover bonds admitted to tading on a regulated market or MTF. The data should include a description of the bond (including a standardised format of identification), price/yield, volume and date and time of execution. The regime should allow for delayed publication and/or the disclosure without specified volumes if the transaction exceeds a given threshold.

In the case of asset-backed securities (ABSs) and collateralised debt obligations (CDOs), CESR recommends that a phased approach would be used to gradually apply to all ABSs and CDOs that are commonly considered as standardised. The regime should likewise be extended to all credit default swap (CDS) contracts eligible for clearing by a central counterparty (CCP) due to their level of standardisation.

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