On 2 June 2023, there was published a letter from the European Securities and Markets Authority to the European Commission, the European Parliament and the Council of the EU concerning the MiFIR review and the current lack of transparency in the EU for over-the-counter (OTC) derivatives, notably single-name credit default swaps (CDS).

Among other things the letter provides that:

  • The events on single-name CDS markets at the end of March revealed that the market remains opaque and, in consequence, subject to a high degree of uncertainty and speculation as to the actual trading activity and its drivers.
  • While MiFIR introduced trade transparency requirements for OTC-derivatives, including single name CDS, the actual transparency provided on trading activity in these instruments remains limited.
  • This stands in contrast to the approach in the United States which provides for a post-trade transparency regime covering a very broad scope of OTC derivatives and with most transactions published close to real-time while providing for volume-masking for large  transactions.
  • ESMA board members are strongly supportive of strengthening the trade transparency requirements in MiFIR.
  • ESMA urges the co-legislators to not lose the opportunity of the ongoing MiFIR review to strengthen the transparency regime applicable to standardised OTC derivatives and particularly the regime for single name CDSs by (i) broadening the scope of instruments subject to the requirements, and (ii) providing for more real-time transparency and a streamlined deferral regime.