Zornitsa Todorova is head of thematic fixed income research at Barclays.
After years of regulatory throat-clearing, the EU earlier this month finally picked Ediphy to build its long-promised consolidated tape for bonds. The pitch? One screen, all the trades. Faster, fairer, more efficient markets.
Yes, we’ve heard it all before — but this time, it’s actually happening. As Esma’s executive director Natasha Cazenave, said in a statement:
With today’s decision, we are taking a decisive step towards setting up consolidated tapes in the EU. This step constitutes a key contribution to building the Savings and Investment Union (SIU) and to the further development of capital markets in Europe.
Market participants will benefit from a consolidated view of market activity for bonds in the EU, with a variety of use cases to the benefit of all participants in the EU’s fixed income markets.
The new tape will scoop up everything: corporates, sovereigns, convertibles, covered bonds — even the dusty off-the-runs that haven’t seen daylight since QE was cool.
The goal is a single stream of prices, volumes, and timestamps from every trading venue in the bloc. That’s no small feat. After all, there are more than 40 of them. Right now, tracking prices across Europe is like doing a jigsaw puzzle with half the pieces missing and the rest deliberately smudged.
Real-time bond reporting is about to go from niche to norm. Today, fewer than one in five trades show up in real time — and that’s if you’ve managed to stitch together data from all the different venues where bonds actually trade.
The new EU tape promises to capture over 90 per cent of trades by count. The rest will show up with a delay, anywhere from 15 minutes to four weeks. The rules are complex, but the gist is simple: the bigger the trade and the less liquid the bond, the longer the wait.
As a result, price discovery in European bond markets is about to get a whole lot simpler and faster.
Systematic trading desks are obviously watching closely. With real-time data flowing, their algos will have more to chew on. Trading is about to get cheaper, too. Our research shows that for the median corporate bond trade — sub-€500k, liquid, and very much the bread and butter of electronic platforms — transparency cuts transaction costs by around 10 per cent.
That could start the next wave of electronification. Today, about half of Europe’s investment-grade credit trading is electronic. But when 90 per cent of trades light up in real time, the screens are only going to get busier.
And it’s not just credit that benefits. Sovereign debt may be more liquid, but Europe’s markets are still a patchwork. Unlike the US, with its single benchmark, Europe has many issuers, many bond curves and plenty of opacity. Transparency won’t fix fragmentation, but it’ll help. Especially for smaller sovereigns and illiquid off-the-runs that rarely see daylight.
The benefits could be huge. As the European Stability Mechanism noted in a blog post last year:
Electronic trading plays a crucial role in ESM and EFSF bond markets, accounting for a majority of the traded volumes and enhancing liquidity in the secondary markets by improving price discovery and making primary market transactions more efficient, especially in challenging market conditions. These advantages allow the ESM to issue bonds more effectively, benefiting its mission to support euro area financial stability.
The US has long worn the crown on bond market transparency. TRACE — or the Trade Reporting and Compliance Engine — has been running for corporate bonds since 2002. But zoom in on government debt, and things get murkier. TRACE only recently started showing on-the-run Treasuries. The off-the-runs are still in the dark. This time, Europe’s casting the wider net — off-the-runs included.
Unfortunately, transparency cuts both ways. The dream is that post-trade transparency levels the playing field and sharpens execution. The fear is that it makes life harder for dealers and institutional investors trying to move big chunks of deb without moving markets. In other words, block trades might not love the flood of light when Europe flips the switch.
Small trades get cheaper, but block trades are a different beast. Bonds don’t trade in big size all that often, and when they do, it’s usually a dealer stepping in, warehousing the risk. That’s a vital service, especially when an investor needs to offload a chunky position fast. But with more transparency, that job gets harder. Large trades will get delayed reporting. But in some cases, the delays may not be long enough.
Take a €10mn trade in a liquid investment-grade corporate bond. Under the new rules, the price hits the tape the next day. That’s not a lot of time for a dealer to quietly unwind the position before the market catches on. As a result, block trades could get pricier — by 10—15 per cent according to our estimates. In choppier markets, some dealers might just step back altogether.
So how do you sling size without lighting up the tape and alerting everyone to it? Portfolio trading.
Portfolio trading is when investors bundle up a large basket of corporate bonds and fire it off in one go. The total notional might be chunky (€40-50 million), but the individual line items typically sit in the €500k —€1mn range. That’s the transparency sweet spot: small enough to print, not big enough to move the market.
About 14 per cent of investment-grade credit already gets done this way. With the tape, that number’s only going up.
And then there’s the Brexit bonus. The EU and the UK are each rolling out their own version of a consolidated tape. The UK’s is simpler, more flexible, and comes with longer deferrals for block trades and illiquid bonds. Take that same €10mn trade — if it prints in the UK, it won’t hit screens for two weeks. In other words, a softer landing for dealers.
That obviously opens up the door to regulatory arbitrage. If you’re trying to move size without spooking the market, why not route the flow through the UK and keep the print off the radar?
One thing’s certain: the bond market is becoming increasingly equity-like. Faster, nimbler, more efficient. But equitification comes with trade-offs. Bite-sized trades, vanishing signals, algos locked in arms races, and a market that moves at machine speed.
In the US, TRACE is so baked in it’s become a verb. Traders don’t ask is this bond transparent? They ask does it TRACE? Now the EU will soon have its own version: fairCT — short for fair consolidated tape. Does it fairCT? doesn’t exactly roll off the tongue, but we’ll find out how well it functions in 2026 when the system goes live.
And if it actually works? One tape to rule them all, one tape to find the prints, one tape to track them all — and in the data, bind them. The algos will love it. Block trades might not.
