Trading Venues in Spain: Regulated Markets, MTFs, and OTFs

What are Trading Venues?

According to the Securities Market Law, Trading Venues are multilateral systems where interests in buying and selling financial instruments interact. They are divided into three main categories:

• Regulated Markets:

  • Operated by a market governing body.
  • Bring together buying and selling interests according to non-discretionary rules.
  • Authorized and supervised by the CNMV.

• Multilateral Trading Facilities (MTFs):

  • Operated by investment firms or market governing bodies.
  • Allow the interaction of buying and selling interests under non-discretionary rules.

• Organized Trading Facilities (OTFs):

  • Multilateral systems for bonds, obligations, securitizations, emission rights, and derivatives.

Authorization and Supervision:

The CNMV authorizes the creation and operation of these venues. Additionally, strict requirements are established to ensure transparency and security. Finally, the CNMV can revoke authorizations in case of non-compliance or irregularities.

Organization and Functioning (five key aspects):

1. Trading Venues must have an authorized governing body.
2. Risk management systems, contingency procedures, and the capacity to handle high volumes of orders are required.
3. Aspects such as algorithmic trading, conflicts of interest, and direct electronic access are regulated.
4. Volatility management mechanisms must be in place to interrupt or temporarily limit trading when significant price fluctuations occur in a financial instrument.
5. Trading venues must have agreements with clearing houses, settlement systems, and central securities depositories to facilitate the efficient settlement of transactions conducted in the venue.

Four Additional Key Aspects of Regulation:

1. Transparency: Clear rules must exist regarding commissions, co-location services, and minimum tick size.
2. Supervision: Mechanisms must be in place to detect and prevent market abuse and trading anomalies.
3. Remote Access: The possibility of establishing remote access mechanisms in other EU Member States must be available.
4. Suspension and Exclusion from Trading: The governing body of a trading venue may suspend or exclude a financial instrument from trading if it no longer complies with the venue’s rules.

Conclusion:

Trading Venues are pillars of the Spanish securities market, ensuring transparency, security, and efficiency in the trading of financial instruments. Their strict regulation, overseen by the CNMV, protects investors and ensures market integrity.

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