ESMA publishes data for quarterly bond liquidity assessment

Purpose
The European Securities and Markets Authority (ESMA) has published the new quarterly liquidity assessment of bonds to provide a transparent and up-to-date picture of bond market liquidity. This quarterly publication is aimed at promoting a well-functioning and liquid bond market in the EU, thereby enhancing investor protection and supporting the smooth functioning of financial markets.

Effects on Industry
The publication of bond liquidity assessments will have significant effects on the industry, including market participants such as banks, investment firms, and asset managers. The assessment will inform their trading decisions, risk management strategies, and investment choices, ultimately contributing to a more liquid and efficient bond market. Additionally, the transparency requirements for bonds deemed liquid will apply from 17 February 2025 to 18 May 2025, which may influence the investment strategies of market participants.

Relevant Stakeholders
The stakeholders affected by this update are primarily market participants, including:

• Market makers and traders who rely on accurate and timely liquidity assessments to inform their trading decisions.
• Asset managers and investors who use bond liquidity assessments as a factor in their investment choices.
• Regulators and supervisors responsible for overseeing the EU’s financial markets and ensuring compliance with relevant regulations.

Next Steps
To comply with this update, market participants should:

• Regularly review and update their trading strategies and risk management approaches to reflect the latest bond liquidity assessments.
• Ensure they have access to the full list of assessed bonds available through ESMA’s Financial Instruments Transparency System (FITRS) or the Register web interface.
• Familiarize themselves with the transparency requirements for bonds deemed liquid, which will apply from 17 February 2025 to 18 May 2025.

Any Other Relevant Information
ESMA also publishes two completeness indicators related to bond liquidity data. These indicators provide additional context and insight into the quality of the bond liquidity assessments. Market participants are encouraged to consult these indicators as part of their ongoing assessment of bond market conditions.