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June 2008 | ifr special report | 13 SOVEREIGN BOND MARKETS ROUNDTABLE

market conditions. In this equation, we have had the introduction of two elements of freedom: the introduction of a choice to the dealers of what platform they wished to quote on, which was intentional from the issuers; and the actual uncertainty in the market in general. The latter is probably the main culprit as far as the fall in volumes on the electronic platforms is concerned. Based on the information that I have, it's not only MTS that is suffering in terms of cash market volumes but most of the electronic trading platforms.

Simon Maisey, JPMorgan

ation which is probably going to lead to better transparency. At least, we hope so.

Rivoire: If I may, I think that you will appreciate the change in our position with regard to compliance, but the business done with the clients is another area which we consider to be our first goal. It is more important to offer good liquidity to clients rather than to the market.

Leclercq: Absolutely.

Maisey: I agree, and then we could look at the question of compliance. Meeting investors' requests would be another very important area to look at.

Leclercq: Compliance is one thing and looking at customer volumes is another.

Proni: The two should be interrelated.

Leclercq: You have such a large array of different things which you do, and we look at every single little thing. But instead of only looking at the bonds which you trade within the inter-dealer market, we are looking now at how you are complying with your market-making obligations and making sure that there is transparency and there are continuous prices. So it is shifting a bit from volumes in the inter- dealer market to making sure that there are prices all the time. But we continue to look at customer volumes.

Maisey: I think it is not just about customer volumes, it is also about compliance: supporting the investor base,

in terms of when they want a secondary market price. So it is not just about volume, it is about the obligation we have to investors as well other things such as research.

Rivoire: On the repo question as well, especially when the money market is changing, to be able to offer to clients repo prices for any security they have, especially in the sovereign sector, is a very positive development I think.

IFR: While cash trading has diminished over the last couple of months, have the changes which were announced by Holland and Belgium, impacted the level of repo transactions at all?

Proni: From the MTS standpoint, with respect to the repo market, it remains in fairly good health for reasons tied into what's going on. In that respect MTS doesn't really have that many concerns. As far as the changes that you mention with respect to Belgium and the Netherlands, in terms of the multi-platform environment, I'm assuming we are also talking about the soon-to-be-implemented introduction of similar measures in France.

Clearly when you are the incumbent and a franchise disappears, you are going to suffer a bit, so obviously we have fewer banks quoting those bonds than we had previously. By definition, that was going to happen. With respect to the actual business and number of participants concerned, I would tend to say that not an awful lot has changed if you discount the effect of current

So I think MTS has addressed the challenge of the multi-platform environment in the best way that it could, essentially by maintaining the principal strategy of ensuring that we could maintain the quotes of the primary dealers for compliance purposes with issuers on the MTS platform. If we can achieve that, which so far all the indicators are saying we have – although it is still very early to really draw any final conclusions – then I think the rest should be pretty much in hand.

Ezquerra Martin: In Spain it was the other way around, because MTS was the challenger, not the incumbent, back in 2003. So it's strange to see the situation in reverse. We introduced MTS as a second platform back in 2003 before it became so prominent in the European government bond market. We are also considering introducing further flexibility to our system by introducing potentially a third platform but, frankly, we are not in a hurry because the situation is a bit challenging and we also want to look into some final details – such as what measures might be necessary to maintain liquidity in emergency market situations – before we introduce the platforms of our potential new entrant. For now, with volumes falling so significantly, we are in no real rush to do this. We are looking at it and we are addressing the problems one by one. Overall, I agree with the view that when you introduce a new challenger, things seem to change radically, but in the end they are more or less the same.

Proni: That's assuming the incumbent has done a half decent job in the beginning, which I would like to think that MTS has.

Ezquerra Martin: Exactly, and our incumbent seemed to be doing that. So things need to change so that they remain the same at the end of the day.

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