In 2018, the EU introduced common rules for trade transparency for non-equity instruments. They entail that for orders current bid and offer prices as well as related quantities must be made public. For trades e.g. price, quantity and trading venue must be published as soon as possible.
However, each country’s regulatory authority may allow less transparency if it assesses that it will be expedient to the country’s financial markets. This applies for example where the transparency is expected to harm the liquidity. For instance, if investors refrain from making larger trades as they find that they will face worse prices because other investors adjust their prices when they obtain the information.
As opposed to the other EU-countries, Denmark has only to a limited extent made use of the option to allow lower trade transparency on the market for mortgage bonds.
”In Denmark we have successfully applied relatively high transparency to mortgage bonds. The trade transparency contributes to ensuring that the investors may more easily assess the prices offered on the market. According to our analysis, investors still carry through large trades even though they must disclose information which other investors may potentially benefit from”, says Anders Balling, Assistant Director General, who heads the division for capital markets analysis in the Danish FSA.
The Danish FSA has evaluated the trade transparency for mortgage bonds in connection with the upcoming review by the European Commission of MiFIR
(Markets in Financial Instruments Regulation), which according to plan will commence in the autumn 2021.
”It is relevant to share the experience from the Danish mortgage credit market with other countries as it proves that there is no need to worry about a high level of trade transparency. On the contrary, as appears from our analysis. The Danish system also receives broad support from both issuers and investors”, concludes Anders Balling.