ICMA, ISDA and AFME: Updated Paper on SI Regime Removal Confirms Smooth Transition for Bond and Derivatives Markets
Credit: The Times
The joint trade associations confirm that the removal of the Systematic Internaliser regime for bonds and derivatives, completed in the EU in September 2025 and the UK in March 2026 has been absorbed with no adverse market impact.
Context:
On 2 April 2026, ICMA, jointly with ISDA and AFME, published an updated version of its October 2025 briefing paper on changes to the Systematic Internaliser (SI) regime for bonds and derivatives. The update reflects the completion of the regime removal process: the SI regime for bonds and derivatives was eliminated in the EU in September 2025, and the remaining UK elements were removed on 27 March 2026, under the FCA's Policy Statement PS25/17.
The SI regime, a construct of the original MiFID II framework from 2018 required certain investment firms dealing on their own account outside trading venues on an organised, frequent, systematic, and substantial basis to register as SIs and comply with pre- and post-trade transparency requirements. In practice, the regime for bonds and derivatives was widely criticised as generating a compliance burden without delivering meaningful transparency benefits, because the DPE (EU) and Designated Reporting (UK) post-trade regimes had already addressed the transparency objectives more effectively.
The updated paper confirms the associations' initial assessment that de-registration of bond and derivative SIs would have no adverse effect on post-trade reporting or the provision of liquidity. The UK's PS25/17 was permissive in design, removing obligations rather than creating new ones and the transition has been managed without market disruption. Investment firms across the EU and UK are expected to de-register from SI status for bonds and derivatives, as Deutsche Bank, Barclays, and other major market-makers have publicly confirmed.
Rules and Guidelines:
The regime removal has the following practical consequences. In the EU, the SI transparency reporting obligations for bonds and derivatives have been replaced by the Designated Publishing Entity (DPE) regime, under which transaction reporting obligations are allocated to a designated entity rather than to every SI. In the UK, the Designated Reporting (DR) regime replaces the SI obligation for post-trade transparency reporting. Both regimes are simpler in design and lower in compliance cost than the SI framework they replace.
For equity instruments, the SI regime remains in place both in the EU and the UK. The scope of PS25/17 was deliberately limited to bonds and derivatives; a separate FCA consultation on equity market structure and transparency is expected in the first half of 2026. In the UK, PS25/17 also made changes to the Reference Price Waiver conditions for equity trading venues and lifted certain restrictions on matched principal trading by MTF operators, changes that support competition and market resilience in UK equity markets.
The EU's MiFIR review (MiFIR II) continues with further technical standard development at ESMA, including on post-trade deferral frameworks for bonds (RTS 2). The associations remain engaged in ensuring that the consolidated tape and post-trade transparency standards that follow from MiFIR II are calibrated to support market liquidity rather than undermine it.
Businesses Affected:
Investment banks, broker-dealers, and market-makers that were previously registered as SIs for bonds and derivatives should confirm de-registration from SI status where they have not already done so.
Trading infrastructure and reporting teams need to ensure post-trade reporting is now correctly routed through the DR (UK) or DPE (EU) regime rather than through SI-status obligations.
Compliance teams maintaining MiFID II/MiFIR compliance programmes should update their books and records to reflect the regime removal and confirm that no SI-status-related obligations remain for bonds and derivatives.
Fixed income and derivatives market participants are monitoring the broader market transparency and structure reform agenda, including the equity consolidated tape and post-trade deferral standards under MiFIR II.
Next Steps:
Confirm de-registration from SI status for bonds and derivatives with the FCA and/or relevant EU NCAs, where not already completed.
Update post-trade reporting workflows to reflect the DR (UK) and DPE (EU) frameworks as the applicable reporting mechanisms. Ensure system documentation is updated for audit purposes.
Monitor the FCA's planned equity market structure consultation (first half of 2026), which may propose changes to the SI regime and transparency rules for equities, the one area where the SI framework remains in place.
Track the EU MiFIR II technical standards pipeline, particularly RTS 2 amendments on bond post-trade deferrals, which ICMA and AFME have engaged on extensively and which directly affect bond market transparency calibration.
Source | ICMA | SI Regime for Bonds and Derivatives
