EuroCredit MTS says it is re-shaping its eligibility criteria to accommodate the growing volume of bonds which meet its €3 billion minimum listing criterion. The market now determines which bonds are benchmarks via a new selection process. Each market maker has the choice to select the eligible bonds it wishes to quote, allowing them to align their book running obligations with their liquidity commitments on the EuroCredit System.
In addition to reaching €3 billion in size, an eligible security must be chosen by at least seven market makers before it can be listed on the system. This revised business model is a marked departure from the previous business model wherein market makers were allocated, for quoting purposes, six bonds each month on a random basis. This original model proved effective when the platform was introduced in May 2000, when only few issues met the EuroCredit MTS listing criteria, but is now considered inappropriate.
“The market trend towards benchmark programs looks set to continue indefinitely, and these changes to EuroCredit MTS enable the issuers and their book runners to determine what does and what does not trade on the System as a benchmark,” says .Gianluca Garbi, Chief Executive Officer of EuroMTS. ” The rapid and substantial increase in liquidity on the System shows that these developments are in response to market demands, and underlines the central role of EuroCredit MTS in the ongoing development of Europe’s covered bond markets.”
EuroMTS says improvements in liquidity have already become apparent on EuroCredit MTS. Although each Market Maker is required to select at least 8 bonds to quote, the average selection is for 12 bonds. “Depth of market has improved dramatically, with more than €120 million per each side of the market, and the average number of Market Makers per bond has reached 10. Volumes (single counted) on the system currently average €600 million,” says the trading platform. ” A record volume of €1.095billion was reached on the platform on February 6, 2002.”