MTFs or multilateral trading systems are alternative platforms to traditional stock exchanges. Even though they are not classic markets, they work in a similar way, as they allow a meeting between those who want to buy and those who want to sell financial instruments.
Which are precisely the MTFs
The acronym Mtf stands for Multilateral Trading Facilitywhich in Italian means, as already mentioned, multilateral trading system. It is a platform where investors can buy and sell financial instruments simultaneously.
According to European rules (Mifid), an MTF is a system that connects buyers and sellers of securities automatically and following precise and transparent rules. The main purpose is to offer an alternative to traditional exchanges by making trades:
- faster;
- economical;
- accessible even to smaller companies.
MTFs are authorized by the EU
Multilateral trading systems were introduced to improve the functioning of European financial markets by making them safer and more transparent.
In the past, in fact, a significant part of trading took place outside the official exchanges in poorly controlled markets (the so-called over-the-counter) where visibility on executions and prices was limited.
To remedy this fragmentation, ESMA, which is the European markets authority, has established that all platforms that allow multiple orders to meet must be authorized as trading venues.
The Authority has clarified what the authorization criteria are. The directive Mifid IIwhich came into force throughout Europe, serves precisely to make markets safer and clearer.
Its main objectives are:
- increase transparency in trade;
- reduce investor risks;
- clearly track where securities are trading;
- eliminate uncontrolled markets.
Thanks to these rules, today MTFs have become a fundamental part of the European financial system.
The role of Consob
In Italy, MTFs cannot operate without authorization. In fact, they must be previously authorized by the supervisory authorities.
The main one in this area is Consob, which publishes the complete list of multilateral trading systems on its official website.
If you want to check whether a platform is legal, you can consult this register directly. The latter is important because it protects savers. In fact, it allows you to immediately distinguish between a safe regulated market and an unregulated or abusive platform.
What are the main MTFs authorized by Consob?
From the official Consob page it can be seen that the main multilateral trading systems authorized in Italy include:
- EuroTlx, among the leaders in Europe for trading government bonds, bonds and other fixed income instruments;
- Gem and Sedex, Borsa Italiana markets dedicated respectively to international shares and certificates
- Euronext Growth Milan, the market dedicated to the growth of SMEs (small and medium-sized enterprises) managed by Borsa Italiana;
- Vorvel (formerly Hi-Mtf), is a system specialized in different segments, from bond and share auctions to certificates;
- Mts Bond Vision, important for the exchange of government bonds at an institutional and professional level.
The presence of these companies in the Consob register means that the exchanges take place in compliance with the transparency rules established by Mifid II.
Carrying out operations on these circuits therefore means relying on safe and controlled platforms that are very different from unauthorized ones which often promise easy earnings without any legal protection.
What is the difference between regulated markets and MTFs
Regulated markets and MTFs are not the same thing even if in many aspects they are very similar. Both, in fact, are multilateral trading systems authorized by Consob.
Furthermore, they are governed by rules that are controlled by the Authority itself. The main difference between the two concerns the level of regulation. The former, in fact, provide:
- very strict admission rules;
- very high transparency requirements;
- very strict controls on companies that decide to go public.
MTFs, on the other hand, are more flexible platforms. In fact, they can be managed not only by market management companies but also by different entities such as investment firms or banks, provided they are regularly authorized. For investors, however, less information is available.
In fact, on these platforms there are no transparency obligations typical of regulated markets such as those relating to:
- to control the company;
- to securities transactions carried out by managers, auditors or administrators;
- to the main shareholders.
How MTFs work
The operation of MTFs is very similar to that of a traditional stock exchange: an investor who wants to buy a security enters an order into the system and, if another investor is willing to sell it at the same price, the system automatically matches the two orders.
This happens without any manual intervention or personal decisions on the part of those who manage the platform, as also clarified in the official ESMA documents.
What is the difference between OTF and MTF
European legislation has introduced, in addition to MTFs, another category of platforms, OTFs (Organised Trading Facilities). Both have the objective of matching buy and sell orders but the main difference concerns discretion.
In MTFs the manager does not intervene, as the system matches the orders following rigid and predefined rules. In OTFs, however, the manager can intervene to facilitate the meeting between the parties, deciding how and when to execute an order to try to obtain the best result.
The importance of MTFs today
With the spread of online trading, more and more savers are using digital platforms to purchase bonds, ETFs and shares.
This phenomenon can also be seen in the Consob 2024 annual report. In fact, it highlights the growth of retail investors operating via the Internet and the increasingly widespread use of online trading platforms.
Precisely for this reason MTFs have taken on an increasingly important role. In fact, without these platforms, many of these exchanges would not be possible or would take place in less regulated markets.
Their role has therefore become increasingly relevant, above all because:
- they reduce the costs of trade;
- improve price transparency;
- increase market competition;
- they make it easier to buy and sell securities.
