Transparent price formation in the fixed-income and derivatives market still leaves room for improvement


A study by the Dutch Authority for the Financial Markets (AFM) on the effectiveness of the MiFID II regulatory framework for the fixed-income and derivatives markets shows price formation still needs to be more transparent. The MiFID II rules are also considered less suitable for the fixed-income markets. The AFM does, however, note a shift towards on-venue trading for bonds and derivatives.

In anticipation of potential changes to the current MiFID II framework, the AFM has conducted an analysis of the fixed-income and derivatives markets focussing on the primary bond markets and the secondary fixed-income markets. The AFM’s recommendations include increasing the degree of standardisation in fixed-income instruments. After all, transparent price formation requires a financial instrument to be sufficiently liquid, which in turn means a certain degree of standardisation.

Efficient price formation

Transparent and liquid bond markets are essential for efficient price formation for both issuers and investors. This makes it easier to issue new fixed-income instruments, which will ultimately lead to lower financing costs. Broadening the mix of available finance and reducing dependence on tailored bank loans fits within the philosophy of the Capital Markets Union.

A visible shift

The AFM notes there has been a shift of trading in bonds and derivatives towards trading platforms. Especially trading in derivatives subject to the clearing obligation has moved to multilateral platforms. We also observe an increase in the use of multilateral electronic trading platforms in the fixed income markets. Unfortunately, so far this shift has not led to greater transparency in price formation, due to the low liquidity of most of these instruments.

Journalists may contact Maarten Dijksma, AFM Press Officer, on 06 11 34 02 81 or

The AFM is committed to promoting fair and transparent financial markets.

As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.

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