Despoina Markella Bakopoulou | European Investment Bank (EIB)
Martin Scheicher | European Central Bank (ECB)


fixed income , market structure , liquidity , transparency , bonds , dealers

JEL Codes:

G12 , G15

Prepared by Despoina Bakopoulou and Martin Scheicher. This SUERF Brief should not be reported as representing the views of the ECB or the EIB. The views expressed are those of the authors and do not necessarily reflect those of the ECB, the EIB or the SSM. The paper was written while the first author was working at the ECB. We are grateful to Alex Duering, Caroline Le Moign and Antoine Bouveret for very helpful comments and suggestions.

Recently, the rules governing transparency on government bond trading in two of the world’s most important financial markets, the US and the EU, have been undergoing significant changes. We focus on transparency as the release of post-trade data to the general public close to the time of the trade. The purpose of this brief is to describe where the regulators of these two markets stand on this matter. We also emphasise the importance of transparency for market functioning and its potential interaction with market liquidity. We undertake a broad US-EU comparison and discuss the potential lessons from the US process for EU markets.

In many key segments of the financial system trading is taking place outside exchanges in “Over the counter (OTC)” structures1. Government bonds, which are very widely held by investors across the globe and serve as a vital safe asset are traded in bilateral decentralised structures. Dealers provide liquidity and trade the bonds with smaller or less active firms, in part by using their own balance sheets for inventory holding or hedging purposes. In March 2020, government bond markets globally suffered a severe dislocation with a sharp drop in market liquidity and very high volatility. Trading conditions normalised only after large-scale intervention by the Federal Reserve and other central banks. This unprecedented shock at the core of the global financial system provided further impetus to wide-ranging structural reforms of trading. One core element of the reform process is increasing transparency.

What is our aim with this policy brief?

In early 2024, we observed some noteworthy developments in the rules governing transparency on government bond trading in two of the world’s most important financial markets, the US and the EU. We define, for the purposes of this policy brief, transparency as releasing post-trade data to the general public close to the time of the trade.2 With the brief, we aim at taking stock of where the regulators of these two markets stand on this matter. We also attempt to highlight its importance, given the – still ongoing – debate on how trade transparency could interact with market liquidity.3

The publication of transaction details after execution is vital to safeguard fair and open markets. Transparency can reduce frictions in trading and thereby foster robust market liquidity. Without transparency, there is a risk that markets fragment into insiders who have good visibility of transactions and prices, and outsiders who lack such information. For transactions on centralised exchanges (e.g. in stocks, options or futures), the price and trade history is readily available to investors through platforms provided by exchanges and other private sector entities. Mandatory publication of transaction data on US corporate bonds has already started long before the Global Financial Crisis, in January 2001. The Trade Reporting and Compliance Engine (TRACE) is the platform for the mandatory reporting of transactions. All broker-dealers who are FINRA4 member firms have an obligation to report transactions in TRACE-eligible securities under an SEC-approved set of rules.5 Availability of transaction information has created a fast-growing area of research on trading activity, dealer behaviour and liquidity which has widely expanded our understanding of the drivers and dynamics of trading conditions in bond markets.6

What are the developments in the US and the EU?

US authorities appear to have gradually shifted towards increased transparency on individual government bond data. For years, data on trading of US Treasuries have been reported to a centralised platform managed by FINRA. Since 2020, aggregated data on US Treasuries’ trades have been published on a weekly basis7. In early 2023, the publication of aggregate Treasury trade data was increased to daily8, with an enhanced scope9. Several officials, including SEC’s Gary Gensler, have been vocal10 on the need for enhanced transparency – for example, in April 2022, Gensler stated11 that the “public dissemination of Treasury trade data could help enhance counterparty risk management and the evaluation of trade execution quality. It also could expand the provision of liquidity”. And, in late 2023, a proposal12 for dissemination of individual trade data was tabled for the first time. This proposal covers a limited scope of on-the-run13 bonds and, importantly, foresees that “appropriate” dissemination caps for “large trades” are maintained in the US regulatory framework14. Still, its adoption in early February 202415 illustrates the general spirit in the US on this matter. Amidst receiving conflicting comments16, the US authorities justified the proposed rule by claiming it could benefit market liquidity, as well as price discovery and additional intermediation – notwithstanding that they also acknowledged the need for volume caps.

The EU process is following a different, and somewhat more complex, trajectory. The 2018 overhaul of MIFIR introduced a set of rules requiring pre- and post-trade transparency when trading “non-equity” instruments in the EU, including government bonds. The EU regulators even stated that, in principle, the price and volume of an (individual) trade should be published “as close to real time as possible”17. However, several caveats were attached to the rules which, in practice, resulted in delayed, or lower, transparency – especially for government bonds. Most relevant among those was a discretion allowing each national authority to defer the publication of post trade data (both price and volume), if the large size of the trade, or the lack of liquidity in the relevant market, could raise concerns (measured by exceeding formalized thresholds18). The discretion was wide enough to result in a patchwork19 of approaches across the EU: Publications of data were done on an individual or aggregated basis, deferred for longer or published sooner. In particular the publication of trade volume was subject to more restrictive rules and published possibly only in aggregated form. ESMA had also highlighted the wide – and divergent20 – use of deferrals. Especially in the case of government bonds21,22, this resulted – for a large share23 of transactions – in publications of data only in aggregate form for 4 weeks after the trade – or even indefinitely.24 The discussion around the effectiveness of this transparency regime was active while the regime was being gradually implemented throughout the EU25. To compare, for other non-equity instruments, such as corporate bonds, deferrals were also used, to a higher26 extent than government bonds. There are some indications that the deferrals for other bonds were – for the majority of the trading activity – shorter in duration (the standard 2 day deferral prescribed by the relevant Regulatory Technical Standards), according to ESMA’s analysis27, even though for government bond data the authorities often enabled publication of at least some aggregate data during the longer deferrals28.

Simplified29 overview of US and EU approaches for the transparency of government bond trade data:

*See footnote 30

Against this background, it was no surprise that transparency was one of the key themes attracting drafting attention – and also heavy debate – during the recent legislative process for revision of MIFIR. This revision started in 2021 and concluded in early 2024. In their compromise31, the EU co-legislators agreed that the post trade transparency framework should be modified and harmonized32, by placing the deferral conditions in a legally binding text which would be applicable throughout the EU and by narrowing the scope for the previously existing discretion. However, specifically on government bonds, the discretion for deferred publication is maintained33, especially on trade volume data. Nevertheless, it is comparably more restricted, and better structured34, compared to the previous state: Firstly, “indefinite” deferrals of individual data would no longer be feasible (with the ultimate time limit being set to 6 months) and, secondly, the criteria underpinning the approach for government bond discretion would be specified by ESMA (thereby reducing national divergence). The revised MiFiR reiterates its fundamental policy principle that real time publication of individual trade data is the ultimate objective, and, even, that deferral periods should gradually be reduced35. However, if one looks at the revised rules targeting government bonds, it appears that a relatively wide discretion is still available, which could result in delaying publication of key trade data36.

Why are these developments important?

An important theoretical debate hides behind the fine-tuning of these rules:

Academic literature has long argued that improved transparency (typically defined as releasing post-trade government bond data to the general public close to the time of the trade) fosters market liquidity37 and integrity in financial markets, as well as benefits investors38. As key benefits a reduction of transaction costs39, increased opportunities for risk sharing and improvements in the risk management are frequently mentioned40. According to Bessembinder and Maxwell (2008), the introduction of TRACE publication for corporate bond trades may have cut investors’ trading costs by around US$ 1 billion per year. Furthermore, concentration among dealers also fell significantly, thereby providing opportunities for increased competition among intermediaries.

In contrast, industry participants have voiced mixed views41: Some commentators, often representing the buy side42, support greater transparency, arguing in the same vein as the academic literature. Others speak against unconditional (real time) transparency for larger and/or more illiquid trades, since this could negatively impact the position of the dealers: These firms would intermediate in the market to provide liquidity and balance sheet capacity for the trade, but then must hedge their own risk within a limited period and public knowledge of the trade data impedes efficient hedging. In essence, the efficacy of OTC trading compared to exchange trading is rooted in the near-elimination of information leakage, which is, in particular, beneficial for major intermediaries. An OTC trade is only known to the counterparties to this trade and so has no immediate impact on market pricing, unlike a publicly visible exchange order that can move prices in an adverse direction, before it is even executed.

This concern on the dealers’ position in the financial markets becomes even more important if we combine it with results from academic research43,44 and industry comments, which warn how adverse the effects would be for market liquidity in case dealers have incentives or are forced to withdraw from their intermediating role, which is vital in the decentralised setup of government bond markets. While these comments focus mostly on the
impact of other aspects, such as tighter capital regulation45, any unintended drawback of (unconditional) real time transparency, could also be a factor which requires further study, to ascertain its potential linkages with dealer liquidity provision.

Curiously lacking from the present discussion is the cost of information processing. Firstly, such costs are influenced by the underlying market structure which constitutes the dissemination starting point: In the US TRACE system information is available in a single location, while in the EU, multiple providers offer data of different degrees of granularity and processing methods. Secondly, there are more than 50,000 trades in euro area government bonds every day, or more than two trades per second during active market hours. While it may be technically feasible to make transaction details public with very low latency, meaningful processing of such information requires substantial investment in IT which may be beyond the capacity of smaller market participants. In practice, economic benefits of more informed trading will accrue to investors that build up advanced information processing capabilities, with diminishing returns available to others that choose to compete in this way. This imbalance of power is not necessarily to be attributed to the specific regulatory developments we discuss in this brief. Still, looking at the broader picture when it comes to information, there could be a market that is not split between those who have trade information and those who do not, but between those who can use that information and those who can’t. Whether this is a better outcome, or whether these outcomes are even observationally distinguishable, should be debated.


Without more concrete empirical evidence isolating the effect of transparency on dealer positioning and as the reform process is still ongoing, it is difficult to assess whether the EU legislator should have edged closer to the US or not, within the recent MIFID II negotiations. US regulators appear46, in practice, to be willing to place fewer restrictions on providing transparency to individual trade data, compared to the EU. This is subject to the caveat for large trades, which exists, in some form47, in both jurisdictions and shows that some concerns around the possible drawbacks of transparency are acknowledged by both regulators, at least to some degree. In any case, both jurisdictions, when forming their most recent policies, on how much transparency to ensure for government bond trading in their respective jurisdictions, follow a compromise approach between the two conflicting positions presented above, even if the structural details of the compromise may differ.

In any case, after dissecting the regulatory evolution in both jurisdictions, it seems that a customized transparency regime for government bonds – and supported by targeted analysis focusing on the effects on transparency in these markets – is more appropriate rather than simply using the broader category of “securities”, as in MIFID I48. This is because such a regime could better account for i) the particular importance of the well-functioning of these markets for the broader economy49, but also ii) the structural changes which have occurred within the government bond markets during the past few years50. This view has been supported in the past by stakeholders with different perspectives (ESMA51, as well as the industry52) and, when examining the structure of the new rules both in the US and the EU, appears to be a common direction of travel. Another common direction on transparency could soon be the consolidated tape for the information pertaining to an specific asset class: This, for the EU, is another feature strengthened in the recent MiFiR review (building also on FMI efforts), in view of establishing a Capital Market Union.

About the authors

Despoina Markella Bakopoulou

Despoina Markella Bakopoulou has worked at the European Central Bank – Banking Supervision on supervisory policy, direct supervision of Systemic and International Banks and legal aspects. Within this work, she was part of the team working on topics related to Financial Market Infrastructures/Central Counterparties from a banking supervisor’s perspective. Currently, she is a credit risk officer at the European Investment Bank’s Risk Management department. Despoina holds a law degree from the National and Kapodistrian University of Athens and LL.Ms from the University of Athens and Goethe University of Frankfurt.

Martin Scheicher

Martin Scheicher is Adviser in the Directorate-General Horizontal Line Supervision of the Single Supervisory Mechanism. His work is focused on derivatives, OTC markets and Financial Market Infrastructure. Martin joined the European Central Bank in 2004. Prior to the SSM, he worked in various positions at the ESRB Secretariat, DG-Research and DG-Macroprudential Policy and Financial Stability. Before the ECB Martin worked in the Austrian Central Bank. Martin has been educated at the University of Vienna and London School of Economics. He has published numerous academic articles related to banking, financial stability and financial markets in academic journals such as the Journal of Financial Economics.

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