European markets regulators have long wrestled with a stubborn trade-off in over-the-counter (OTC) derivatives: more transparency can improve confidence and reduce information asymmetries, but it can also damage liquidity in markets where trading is sporadic and dealer balance sheets still matter. Single-name credit default swaps (CDS) sit at the centre of that tension. They can become highly visible in moments of stress, yet they often trade in fragmented, bilateral workflows with limited pre-trade signals and delayed post-trade clarity.
The EU’s MiFIR Review (Regulation (EU) 2024/791) moves the needle by extending transparency requirements to certain single-name CDS – but only in a tightly scoped way. In effect, the EU is signaling that opacity is a problem worth addressing, while also acknowledging that forcing full transparency in illiquid markets can create new risks (wider spreads, higher execution costs, and less willingness to provide liquidity).
What changed, in plain terms
The revised framework brings pre-trade transparency to a subset of single-name CDS – primarily those referencing global systemically important banks (G-SIBs) and (separately) those referencing an index comprised of such banks – but only when the CDS is centrally cleared and traded in certain venue settings. The obligation applies to market operators and investment firms running a multilateral trading facility (MTF) or organised trading facility (OTF) using a central limit order book or periodic auction mechanism, requiring publication of current bid/offer prices and the depth of interest at those prices.
A key practical nuance is that the EU is not simultaneously imposing a clearing obligation for these CDS. Without a clearing mandate, the transparency perimeter depends heavily on how the market actually clears and trades in practice – meaning significant activity can remain outside the new visibility rules.
For post-trade transparency, the MiFIR Review tightens expectations that transaction details for certain derivatives should be made public close to real time “as technically possible,” while still allowing deferrals calibrated to liquidity and transaction size through regulatory technical standards (RTS). In other words, the direction is “faster and more structured,” but the system retains a mechanism to delay publication where immediate disclosure could harm execution quality.
Finally, the Review advances the EU’s long-running goal of a consolidated tape – a centralized mechanism intended to provide a more complete view of prices and volumes across venues – supported by structured data flows from trade repositories and approved publication arrangements (APAs).
Why the scope is intentionally narrow
Market monitoring suggests that CDS linked to G-SIBs represent a relatively small share of overall single-name CDS activity by notional and by trade count. That means – even if the rules work exactly as intended – large parts of the single-name CDS market will remain unaffected, including CDS on non-G-SIB reference entities and G-SIB CDS that are not centrally cleared.
This narrowness is not an accident; it is a design choice that reflects two realities:
- Illiquidity changes the transparency math. In thin markets, immediate disclosure can reveal a dealer’s position or strategy, inviting adverse selection and reducing willingness to quote.
- Venue-based transparency has limits in OTC markets. Much CDS trading is still executed through bilateral negotiation, where “screen prices” can be indicative rather than firm and where end users may not have full visibility into competing quotes. That structure makes pre-trade transparency harder to impose without fundamentally changing how the market trades.
The result is a regulatory compromise: expand transparency where the market is systemically sensitive (large banks) and where the trading architecture supports it (cleared, venue-based mechanisms), while avoiding a blanket approach that could degrade liquidity.
The transparency paradox: when “more” can be worse
In public debates, transparency is often treated as an unqualified good. In practice, the question is not “transparency vs. opacity,” but “what level of transparency supports confidence without harming market function.”
In illiquid derivative markets, forcing broad pre-trade disclosure can raise execution costs by widening spreads, increasing volatility, and reducing dealers’ willingness to provide liquidity – especially when the number of consistent liquidity providers is small. This is the central paradox: the same disclosure that improves fairness in deep markets can reduce tradability in thin ones.
The MiFIR Review implicitly recognizes that risk. It pushes the system toward greater visibility while preserving tools – waivers and deferrals – to avoid damaging market quality where transparency could have outsized negative side effects.
What legal, compliance, and trading leaders should do now
The firms best positioned under the revised regime will treat this as both a regulatory change and a data-operating-model change. Even where business impact appears limited today, the direction of travel is toward more structured transparency – and firms that build “data readiness” early tend to respond faster and with less disruption when the perimeter expands.
1) Re-map your CDS activity to the new perimeter – based on how you actually trade
A paper-based classification exercise is not enough. The key is tracing where trades occur (venue vs. bilateral), how execution works (order book/auction vs. RFQ/voice), and whether products are centrally cleared. The same “product” can fall inside or outside requirements depending on the execution pathway.
2) Treat pre-trade transparency as a control environment, not a publishing task
Where pre-trade transparency applies, the operational burden sits with venues and operators – but firms interacting with those venues still need governance around quoting behavior, controls on information leakage, and oversight of any systematic changes in spreads or execution outcomes that could trigger internal conduct or best execution scrutiny.
3) Build post-trade reporting and deferral logic that is explainable
Deferrals are not simply a “delay.” They are a rule-bound mechanism shaped by liquidity and transaction size and increasingly defined through technical standards. Firms should assume that supervisors will expect consistent logic, audit trails, and the ability to evidence why a publication was deferred and when it was ultimately disclosed.
4) Prepare for the consolidated tape trajectory
Even when the tape’s immediate utility is debated, the direction is clear: more standardized data contributions and more normalized consumption of consolidated market data. This pushes firms to improve reference data alignment, identifiers, and reconciliation across internal systems and external reporting sources.
A practical way to organize the work is to stand up a short “transparency readiness” program:
- Perimeter and product taxonomy: identify which CDS exposures could fall into the cleared G-SIB scope and through which execution channels.
- Data lineage: confirm which systems generate the fields used in transparency outputs and where transformations occur.
- Governance: define ownership across trading, compliance, market data, and technology for publication controls and exception handling.
The bigger implication: today’s narrow rule can still reshape expectations
Even a limited transparency expansion can change behaviour in two ways. First, it can reset supervisory expectations around what “good” looks like in OTC derivatives data – pushing firms toward more structured reporting and faster availability. Second, it can become a precedent: once a transparency perimeter exists for one subset of single-name CDS, debates about expansion tend to become questions of scope and calibration rather than principle.
The practical stance for firms is therefore neither complacency nor overreaction. The best posture is disciplined readiness: implement what applies now, but invest in the data and governance capabilities that allow you to adapt if – and when – the perimeter expands.
