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Building Domestic Bond Markets in Emerging and Developing Economies: the Role of Market Transparency

Florian Lalanne * Associé, Capital Markets Development, Banque européenne pour la reconstruction et le développement (BERD). Contact :
Jim Turnbull ** Directeur adjoint, Capital Markets Development, BERD.

This article focuses on the role of market transparency in supporting the development of domestic bond markets in emerging and developing economies. Market transparency is defined as the availability of information regarding the activity on bond markets. When organising the supervision of markets, authorities need to set appropriate rules for the reporting and disclosure of information to be able to control the activity of market participants. Improving market transparency should also foster price discovery mechanisms, allowing bond prices to integrate all available information. Due to the very particular structure of the bond market compared to equity markets, it is nevertheless not always the case that transparency supports market development. Starting with an analysis of the microstructure of bond markets, we explore the measures helping to improve market transparency and assess their benefits and limitations to support domestic bond markets development in emerging and developing economies.

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