Pan-European government bond trading network MTS is set to give hedge funds the green light to trade on its electronic markets.
Access to the interdealer platforms is currently limited to investment banks but MTS has been under pressure from hedge funds, such as Citadel and Vega, which have been trying to gain direct access to its markets rather than go through dealers to trade euro-zone government bonds.
This prompted warnings from the European Primary Dealers Association (EPDA) - a trade body representing investment banks - that third party participation in the electronic markets could undermine the current structure and introduce greater risks.
But in a statement released late Friday, Italy-based MTS, which is majority-owned by Nyse Euronext and Borsa Italiana, says its supervisory board now supports the view that it is "desirable to liberalise the access of the market to third parties as a way to enhance the liquidity".
But it adds that further work is needed to address concerns and to "promote a consensual implementation".
MTS says its management board will put together practical proposals, after consultation with its third party access committee, that will be discussed at the next supervisory board meeting.