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Corporate Bonds Seen Hurt by Limited EU Transparency Rules 

May 8, 2017

Katie Linsell, Bloomberg

Europe’s corporate bond market may have escaped the most onerous of new regulations, but dealers and investors say even limited transparency requirements may make it harder to trade.

Rules taking effect next year risk sapping liquidity from corporate bonds because they’ll require traders to publish prices minutes after most transactions, according to market participants scheduled to speak at the International Capital Market Association’s conference in Luxembourg this week. It will be even worse for a small part of the market that has to publish prices before trades take place.

Traders may balk at revealing trades because others can take advantage of the information, making it more difficult to hedge or reduce positions. Transparency requirements under the European Union’s Markets in Financial Instruments Directive II will go further than the U.S.’s Trace system, which only requires post-trade reporting and critics say makes bonds harder to trade.

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