Transparency in trading of European Union government bonds has reached an established level, is improving in corporate paper but lags in the retail fixed-income market, a study found on Thursday.

But the study, published by the Bond Market Association (BMA), acknowledged that transparency in bonds still lagged behind that of exchange-traded equities.

Most trades occur in the traditionally opaque over-the-counter market, but the number of exchange-traded transactions is rising, boosting transparency on liquidity and prices. Electronic trading decreases the cost of trading bonds, cutting the need for manual work.

The bulk of the trading volume in European bonds consists of transactions between financial institutions, although the number of retail trades is greater and their share of the total turnover is increasing.

Peter Knez, global head of fixed income at Barclays Global Investors, said that although intraday price data for a large part of the European corporate bond market was becoming available, transparency in fixed-income continued to trail equities.

“The sort of data that were available for equities 10 years ago is now becoming available for [European] corporate bonds,” Mr Knez said.

The BMA’s study precedes European Commission deliberations on whether to expand transparency provisions in the Market in Financial Instruments Directive to other types of financial instruments, such as bonds.

Bonds are an increasingly common investment in the retail market, and there have been notable losses for private individuals, such as the bankruptcy of Parmalat, the Italian dairy company, in December 2003 on large-scale financial fraud.

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