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Transparency proposals for European sovereign bond markets

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  • Peter G. Dunne

Abstract

Purpose - The debate over the possible extension of transparency regulation in Europe to include sovereign bonds has opened up a number of other issues in need of serious consideration. One such issue is the appropriateness of the entire infrastructure supporting the trading of European sovereign bonds. In recent years, sovereign issuers have supported the development of an electronic inter‐dealer market but have remained unconcerned with the opacity of dealer‐to‐customer trading. The degree of segmentation in this market is high relative to what exists in nearly all other financial markets. The purpose of this paper is to outline the transparency proposals for European sovereign bond markets. Design/methodology/approach - This paper explores why European sovereign bond markets have developed in such a segmented way and considers how this structure could be altered to improve transparency without adversely affecting liquidity, efficiency or the benefits enjoyed by primary dealers and issuers. Findings - It is suggested that the structure of the market could be improved greatly if the largest and most active investors were permitted access to the inter‐dealer electronic trading platforms. This would solve a number of market imperfections and increase the proportion of market activity that is conducted in a transparent way. Originality/value - The paper argues that sovereign issuers in Europe have the means to provide incentives that would influence dealers to support reduced segmentation. Some practical examples of how this could be achieved are provided and the potential benefits are outlined.

Suggested Citation

  • Peter G. Dunne, 2007. "Transparency proposals for European sovereign bond markets," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 15(2), pages 186-198, May.
    • Handle: RePEc:eme:jfrcpp:v:15:y:2007:i:2:p:186-198
    DOI: 10.1108/13581980710744075
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    References listed on IDEAS

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    1. Casey, Jean Pierre, 2006. "Bond market transparency: To regulate or not to regulate," ECMI Papers 1254, Centre for European Policy Studies.
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    Citations

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    Cited by:

    1. François Haas, 2007. "The Markets in Financial Instruments Directive: Banking on Market and Supervisory Efficiency," IMF Working Papers 2007/250, International Monetary Fund.
    2. Paiardini, Paola, 2015. "Informed trading in parallel bond markets," Journal of Financial Markets, Elsevier, vol. 26(C), pages 103-121.
    3. Preunkert, Jenny, 2020. "Primary dealer systems in the European Union," MaxPo Discussion Paper Series 20/1, Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo).
    4. Silano, Filippo, 2023. "Agency costs in primary dealer systems," ILE Working Paper Series 69, University of Hamburg, Institute of Law and Economics.

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    1. François Haas, 2007. "The Markets in Financial Instruments Directive: Banking on Market and Supervisory Efficiency," IMF Working Papers 2007/250, International Monetary Fund.
    2. Lannoo, Karel, 2007. "Financial Market Data and MiFID," ECMI Papers 1317, Centre for European Policy Studies.

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    Keywords

    Bonds; Financial markets; Europe;
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