EU bond market a step closer to TRACE-like platform

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The EU bond market is moving closer to the establishment of a central database for the publishing of post-trade data, similar to that of the Trace platform in place for many years.

Source: IFR News

ICMA published a report recently on the establishment of an EU consolidated tape for bond markets, assessing the feasibility of implementing it for post-trade raw bond data. The European Commission requested the report.

The idea is to aggregate various raw post-trade data sources into a single view – the “consolidated tape”.

Under that system, market players would have an obligation to submit their trades real-time and in less than 15 minutes, giving everyone access to the trade price, quantity and instrument involved.

At present, investors and traders looking for the price of a bond have to rely on various data sources in a deeply fragmented market, leading to inconsistencies and what ICMA says is an uneven playing field.

“The goal of the bond market consolidated tape is to improve post-trade transparency, assist decision-making and provide market insights to end investors, large or small,” said ICMA’s chief executive, Martin Scheck.

“We believe that adoption of the appropriate structure would benefit the whole market, by providing a centralised, high-quality, affordable, trustworthy data source, offering a comprehensive market view.”

ICMA is still trying to fine-tune the details. The post-trade CT report recommends the creation of a revenue sharing scheme for authorised publication arrangements (APAs), a tiered pricing model based on usage, and borrowing of a number of fundamentals from the US fixed income markets’ Trade Reporting and Compliance Engine (TRACE), which publishes US bond trade data.

What is at stake is the lack of transparency in bond markets. This is at odds with MiFID II, which ICMA says has knock-on effects on liquidity, fund valuations and competition.


Europe is way behind the US in terms of reporting. The National Association of Securities Dealers introduced the TRACE system in 2002, with the aim of improving transparency and liquidity.

Some US investors object to TRACE, saying the virtually instant dissemination of trade data discourages risk-taking in the market.

They say that everyone watching TRACE knows what a buyer has paid, leading to a ripple effect in pricing – often to the detriment of the new bondholder.

European bond traders seem positive about ICMA’s proposal to go “full TRACE”, as one trader put it, although they said it would hurt investors and help dealers.

“If I can see every print on a bond within 15 minutes of trading, I will definitely not get picked off and investors will have to be a lot more nuanced when they sell,” said one trader.

“I’ve seen that in TRACE bonds trading with US investors. I loved trading with them.”

Certain platforms already provide trading levels, said traders.

Bloomberg reports lots of trades under the “MiFID Liquid” bonds segment, although it is not perfect, said the first trader. A centralised TRACE-like platform would not change much for him, he said.