ICMA Secondary Markets Update

8 September 2021 - We are pleased to share the latest edition of ICMA’s Secondary Markets Update.

Please feel free to forward this to colleagues who are also welcome to subscribe by clicking on the secondary markets box.



ICMA secondary markets initiatives and workstreams

MiFID II Working Group (MWG) – ‘Transparency Taskforce’ three initiatives:

1. EU Commission (Tilman) transparency advocacy - ICMA proposal - due before 1 Sep 2021 - Transparency Taskforce proposal for new transparency regime (work in progress).
2. HMT Transparency Consultation Paper response - due 24 Sep 2021 - The UK Treasury (Her Majesty’s Treasury - HMT) consults on wholesale markets
3. ESMA Transparency Consultation Paper response - due 1 Oct 2021 - ESMA Consultation Paper on the review of RTS 2 (non-equity transparency)


i. The UK Treasury (Her Majesty’s Treasury - HMT) consults on wholesale markets
Transparency Taskforce is considering responses for non-equities (bonds)
The UK Treasury published a consultation on its Wholesale Markets Review, due 24 September 2021. The Review was established to determine how the UK's approach to regulating secondary markets should adapt post-Brexit, and to ensure that the framework is outcomes based and flexible enough to adapt to future challenges and opportunities. This consultation will consider how the transparency regime for fixed income markets can be recalibrated to ensure it is proportionate to the characteristics of those markets.

ii. ESMA Consultation Paper on the review of RTS 2 (non-equity transparency)
Transparency Taskforce is considering responses for Section 4 - non-equities (bonds)
Section 4.1 discusses some general aspects and presents some targeted changes suggested for RTS 2, including pre-trade transparency requirements and amendments to Article 13 of RTS covering the methodology for the various transparency calculations for non-equity instruments.
Section 4.3 presents the proposed changes to the various reporting fields in RTS 2 for post-trade transparency purposes and of
quantitative and qualitative data submitted to ESMA for the transparency calculation.
Section 4.4 presents ESMA’s proposals for reviewing the regime of flags to be used for post-trade transparency purposes.
If you would like to take part in ICMA’s Transparency Taskforce advocacy work, on a contributing basis, in any of the three initiatives mentioned, please contact Liz Callaghan.

Common Domain Model (CDM) for repo and bonds 
On 21 July 2021, ICMA held a virtual event providing a round-up of its CDM project for repo and bonds, including demonstrations of the CDM in action, as well as a panel discussion with members of ICMA’s CDM Steering Committee on key take-ways from the project, the path to implementation and next steps.  
The recording of the CDM event is available here. Individual CDM demonstrations from the event can also be found here: 
An introduction to Rosetta by REGnosys (5 mins) 
CDM in action – execution, clearing and settlement of a repo transaction by FINXIS LLC (8 mins) 
Download the presentations by ICMA’s Gabriel Callsen and REGnosys 
The virtual event marked the conclusion of the initial phase of the CDM project for repo and bonds. The CDM for repo and bonds can be accessed here (Note: New users are required to register). 
Next steps: ICMA has launched a survey amongst the ERCC community to determine next steps in relation to the CDM from a repo perspective.

Mandatory buy-ins

ICMA has held further meetings with EU national regulators amidst hope that the European Commission and ESMA will find a legal solution to decouple the mandatory buy-ins provisions from the CSDR Settlement Discipline regime before it comes into force in February 2022. It is broadly understood that not only will mandatory buy-ins (MBIs) be disproportionately damaging to EU bond market liquidity and functioning, but the current framework, largely as the result of Level 1 drafting, contains a number of critical design flaws as well as significant ambiguity around scope and process. The MBI provisions are currently under review by the European Commission and are expected to require significant revision. It is therefore hoped that the other elements of CSDR-SD, including cash penalties, will go live as scheduled on 1 February 2022, but without the MBI regime, and that this will be clarified soon. As well as meeting with various regulators and policy makers, ICMA has shared widely a briefing note outlining the industry’s concerns.
Until regulatory clarification on the future of MBIs is forthcoming, ICMA will remain focused on supporting implementation, including revising the ICMA Buy-in Rules to provide a contractual framework and market best practice for MBIs in the international bond markets.
Please contact Andy Hill if you wish to learn more about ICMA’s advocacy and implementation work related to CSDR-SD or would like to participate in ICMA’s CSDR Settlement Discipline Working Group.

Meeting of SMPC on September 15
On September 15, 2021, ICMA’s Secondary Market Practices Committee (SMPC) will hold its third meeting of 2021. Joining the meeting will be the IOSCO Financial Stability Engagement Group (FSEG) Corporate Bond Market Working Group. The IOSCO-FSEG will update the Committee on the work is undertaking related to corporate bond microstructure and stakeholder behaviour., which builds on the FSB Holistic Review of the March 2020 Market Turmoil. ICMA is chairing the IOSCO Affiliate Members Consultative Committee (AMCC) Bond Market Liquidity Working Party, which is providing industry support and input for IOSCO’s work on corporate bond markets.
If you are an ICMA member active in the secondary bond markets and would like to join the SMPC, please contact Andy Hill.



Regulatory updates


1 September 2021: ESMA publishes second Trends, Risks and Vulnerabilities (TRV) Report of 2021
25 August 2021:  2021 Work Programme of the Joint Committee of the European Supervisory Authorities
24 August 2021: ESMA consults on suitability assessments of DRSP management body members



Relevant publications and news items


August 2021: Estimating Fed’s unconventional policy shocks, ECB Working Paper Series, No. 2585
August 2021: Exchange Traded Funds Thematic Note – Findings and Observations during COVID-19 induced market stresses, IOSCO
August 2021: ICMA Briefing Note of ECB PEPP purchases up until the end of July 2021
July 2021: When the panic broke out: Covid-19 and investment funds’ portfolio rebalancing around the world, Banca d’Italia


ICMA Podcast episodes

Monthly Market update: ICMA Asset Management & Investors Council (27 August 2021)


Future meetings and events

Third meeting of 2021 of the ICMA Secondary Market Practices Committee
15 September, 3pm-4.30pm CEST

bwf/ICMA Capital Markets Conference
23 September 2021, 10:00-12:00 CEST

Admission: This virtual event is free of charge and open to all ICMA members and to interested financial market participants. Register now


ICMA Education

Upcoming online courses from September to November:

Introduction to Bond Markets Qualification (IBMQ)
Credit Derivatives
Fixed Income Certificate (FIC)
Financial Markets Foundation Qualification (FMFQ)
Inflation-Linked Bonds & Derivatives
Assessing the Credit Risk of Corporate Bonds
Fixed Income Portfolio Management & Construction


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