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New EU rules boost electronic fixed income trading volumes - survey

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By Josephine Mason

LONDON (Reuters) – Electronic trading volumes in fixed income have jumped since the introduction of European rules a year ago, research by Greenwich Associates has found, the latest sign that tough legislation is upending the way market participants trade.

Total average daily volumes of EU government bonds traded electronically in the first three quarters of last year rose by 36 percent to $57 billion (£44.1 billion), the report by Greenwich Associates based on a survey of fixed income investors said.

Credit volumes on electronic platforms jumped 39 percent to $4 billion over the same period, it found.

Market participants are using electronic platforms more because the European Union’s Markets in Financial Instruments Directive II (MiFID II), introduced in January 2018, made it more onerous to execute over the counter (OTC) trades, it said.

Electronic venues make time stamping and data reporting easier compared with OTC, the report said.

Electronic trading in interest rate swaps by European buy-side fixed income traders jumped by 36 percent in 2018, compared with 20-percent growth a year earlier, the report showed.

MiFID II, the second iteration of sweeping rules aimed at increasing transparency in financial markets, was broadened beyond equities to cover other asset classes, including fixed income, derivatives and exchange-traded funds (ETFs).

Spot foreign exchange was excluded, but forex derivatives are covered by the rules, which require pre- and post-trade data to be reported. For instance, the prevailing price in the market must be checked and recorded prior to executing a deal.

(Reporting by Josephine Mason; Editing by Alexander Smith)

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