On 13 January 2022, the European Commission adopted a Delegated Regulation amending the regulatory technical standards laid down in Delegated Regulation (EU) 2017/583 (RTS 2) regarding transparency requirements for trading venues and investment firms in respect of bonds, structured finance products, emission allowances and derivatives.

The draft Delegated Regulation seeks to realise a move to phase 3 with regard to the liquidity assessment of bonds. Currently bonds are deemed to be liquid if: the average daily notional amount traded is at least EUR 100,000; the average daily number of trades (ADNT) is at least 10; and if at least on 80% of the days during the last quarter trading took place. Only the ADNT is subject to the phase-in. The four stages correspond to 15 (S1), 10 (S2), 7 (S3) and 2 (S4). Within these parameters the amount of liquid bonds between Q1 2020 and Q4 2020 was between 1.57% and 2.58% of the total bond landscape, UK excluded. The move to phase 3 means that the ADNT will be decreased from 10 to 7, resulting in an expected increase of these numbers to between 2.31% and 3.44%. This is done by replacing Article 17(1) of RTS 2 to this effect.

The draft Delegated Regulation also seeks to realise a move to phase 3 with regard to the size specific to the instrument (SSTI). The SSTI is either a fixed threshold of the daily notional amount traded (of EUR 200.000 or 300.000 depending on the type of bond) or the amount that lies above the 40th percentile of the actual daily notional amount traded, whichever is higher. For corporate bonds this meant, based on 2020 data excluding the UK, that the pre-trade SSTI waiver applies for tickets of EUR 400.000 or higher. For sovereign bonds this figure is EUR 900,000. Moving to phase 3 means that the 40th percentile will be replaced by the 50th percentile, thus increasing the threshold above which a pre-trade transparency waiver is available respectively to EUR 600,000 and to EUR 1,500,000. This is done by replacing Article 17(3) of RTS 2 to this effect.

The draft Delegated Regulation will be submitted to the Council of the EU and the European Parliament to consider for approval. If neither objects, it will enter into force 20 days after it is published in the Official Journal of the European Union.

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