The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

This led to vastly increased volumes in Exchange Traded Funds (ETFs) and equity linked derivatives.

We are now seeing similar changes in the bond market. In terms of value, it is about a third larger than the equity market, but with equivalent trading volumes; on any given day only about 25 per cent of bonds are traded, and it is not the same bonds that are traded each day.

In the past few years, platforms such as Tradeweb, MarketAxess and Bloomberg have established themselves, beginning to replace trading by phone. Bond EMSs have emerged that sit above dealer runs. Asset Managers, Outsourced Dealers and Investment Banks are all benefiting from these systems which, along with Request for Quotes (RFQ), help manage order books, optimise liquidity access and enable best execution. 

Evaluated prices

Currently, most bond index levels are derived using evaluated prices whereby a price is estimated based upon bonds with similar characteristics. But bond calculation agents don’t have access to all the trading information due to the fragmentation of bond trading platforms and other liquidity pools. As a result, bond fund managers often feel that the price at which they have executed a trade is not reflected in the evaluated price used in their benchmark index. This lack of transparency creates pricing risk for bond ETFs and is detrimental to their growth. 

Regulators in the UK and European Union (EU) are looking to bond EMSs, which aggregate bond trading across various platforms and other execution methods, as a possible solution. These systems could provide a reference price that is representative of bond market trading activity. Bond indices are likely to adopt these consolidated tape prices in their calculations, which would provide a better indication of a bond manager’s performance. This should then also boost the market for bond ETFs and bond-linked derivatives.

This in turn will likely encourage the take-up of these bond EMSs by Asset Managers, Outsourced Dealers and Investment Banks. Indeed, firms that already use them are experiencing significant benefits from improved execution and cost savings.

By late 2026, the Financial Conduct Authority intends to implement a consolidated tape of bond prices and volumes across all platforms and other over-the-counter trades.

Firms would be well advised to consider intended consolidated tape of bond prices and volumes could mean for their business. Firms that already use bond EMSs are experiencing significant cost benefits from improved execution, meaning that those yet to utilise them risk being left behind.

Raphael de Santos is a director of the asset & wealth management team for Consulting at Davies. He has extensive experience in developing policies, leading teams in market data, index and portfolio construction, equity derivatives strategy, and research and trading. Consulting at Davies, formerly Sionic, specialises in improving business, technology, and people performance across financial services.