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AIFMD II is more than a regulatory technical update. For alternative investment fund managers, it reinforces expectations around robust valuation, timely risk monitoring, and clear transparency especially in stress market conditions. For strategies that use credit derivatives or other less‑liquid instruments, the challenge is often not interpreting the rulebook—it’s producing defensible, auditable market data.

AIFMD II raises especially the bar on how managers assess liquidity and its cost in OTC markets. OTCStreaming helps you respond with better data, stronger governance, and clearer evidence —with live, streaming bid-offer levels and an audit trail you can stand behind.

Liquidity Management Tools (LMT) under AIFMD II

From April 2026, AIFMD II requires open-ended AIFs to have at least two appropriate liquidity management tools (LMT) to manage redemptions and subscriptions during periods of market stress. Rather than relying solely on redemption restrictions, measures such as swing pricing or dual pricing can help funds remain open in stressed markets while protecting existing investors from dilution. These tools can also be combined with extended notice periods to better align redemptions with the liquidity available in the underlying market.

OTCStreaming: Regulatory-Grade Transparency for OTC Markets

OTCStreaming delivers live, streaming bid-offer prices from multiple liquidity providers—giving users a continuously updated view of market levels and the cost of liquidity, with a clear audit trail. This supports stronger valuation governance by helping you evidence price robustness and oversight, including transparent bid-offer levels across the portfolio.

OTCStreaming builds separate bid and offer curves for each supported asset class and maturity bucket. A “mid curve” is not treated as an observable market object; instead, mid levels are derived from bid and offer—while preserving any non‑linearities introduced by the mapping from quotes to the underlying latent variable (e.g., hazard rates, discount factors, implied volatility, implied correlation).

This approach makes the cost of liquidity explicit—so you can evidence, for any valuation point:

• the timestamped bid-offer inputs and contributing providers
• the resulting bid-offer levels used for valuation and risk
• the distance to mid as a transparent measure of liquidity conditions
• a consistent, auditable trail suitable for governance and regulatory review

For a long‑only CDS portfolio referencing the current iTraxx Europe and CDX North America Investment Grade constituents (3Y and 5Y maturities), OTCStreaming can use client data to produce historical valuations based on bid and offer survival‑probability curves observed over the last six years (example provided by Hellebore Capital). Valuations are computed using the actual contract terms as of 14 January 2026 (e.g., coupon, recovery assumptions, accrual conventions) and the relevant discount factors, while the default component is driven by the historical survival probabilities derived from dealers’ bid-offer quotes.

The chart shows:

• The 6-year historical 25% and 50% and 75% quantiles of the bid-offer spreads in basis points across all names for 3Y and 5Y.
• The corresponding portfolio quoted spreads quantiles in basis points.

It highlights the non-linear relationship between bid-offer levels and broader market conditions. Bid–offer spreads can widen sharply during market shocks, such as March 2020. In 2022, index spreads were close to the 75th percentile of their pandemic-era highs, yet the market continued to function and bid–offer spreads remained relatively tight compared with overall spread levels.

It also illustrates curve dynamics across tenors: in normal conditions, 3Y CDS bid-offer are typically around twice the 5Y bid-offer, but in stressed periods the two tenors can converge as liquidity premia rise and “everything becomes expensive”. OTCStreaming provides a clear, time-stamped picture of liquidity and a fund’s ability to transfer risk in stressed conditions.

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Make AIFMD II Requirements Easier

Firms that succeed under AIFMD II treat transparency as a competitive advantage—strengthening valuation and risk governance while reinforcing investor confidence.

With OTCStreaming, powered by your own data, you can:

• Access regulatory-grade OTC market data, with timestamped bid-offer levels and full provenance
• Strengthen valuation and risk governance, backed by consistent curves and an auditable trail
• Improve investor and regulator reporting, with explicit liquidity-cost evidence (e.g., distance to mid)
• Scale across asset classes and market regimes, with a foundation built for evolving requirements

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