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MiFID II: why fund managers need bond prices to always be right  

November 4, 2015

Markets Media

As the industry dissects the detail from MiFID II RTS, Dev Bhudia of GoldenSource focuses in on the bond transparency rules – explaining why failure to show thorough thinking behind pricing leaves fund managers exposed to potential fines and reputational damage.

After all the waiting and wondering, one could say we are now in a period of pondering – call it the calm after what was the MiFID II late September storm. The problem is that the clock is well and truly ticking. Last month’s publication of the official technical standards’ leaves fund managers responsible for managing, collecting, and providing a deluge of data for reporting all within the next 15 months. So perhaps a little less reflection and a little more action is the order of the day.

One aspect of the standards that can be addressed sooner rather than later is bond transparency. Like in equities, fund managers now have to publish bid and offer prices in other asset classes – including fixed income. Under MiFID II, bid and offer information needs to be published for around 2,000 bonds that are deemed to be “sufficiently liquid”. However, herein lies a grey area – exactly how do fund managers decipher when a bond is and isn’t liquid? How much information are they collecting at the moment, and how are they measuring it?

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