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Multilateral Trading Facilities ("MTFs") 

01 December 2011

Impact Red traffic light

High/medium impact if operating an MTF that is a similar business and size to a regulated market.

Other areas to consider

Automated trading; Systematic Internalisers; Trade reporting; Pre-trade transparency

Current MiFID rules

An MTF is defined as a multilateral system, operated by an investment firm or a market operator, and which brings together multiple third-party buying and selling interests in financial instruments - in the system and in accordance with non-discretionary rules - in a way that results in a contract.
Operating an MTF is an investment service to which MiFID applies.
MTFs are required under MiFID to comply with organisational, transparency and market surveillance requirements that are similar to those applying to regulated markets (“RMs”).
MiFID Level 1 Directive Arts: 4(15), 13, 14, 25, 26, Annex I, Section A.

FSA rules


Proposed changes
Draft Directive Recital (50)
rticles 18, 19, 20, 24, 25, 27, 28, 31, 32-33, 34, 53, 59, 60
Draft Regulation
Article 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 22, 23

Responding to concerns that there is a lack of alignment of the organisational and the market surveillance requirements for MTFs and RMs which may lead, in practice, to a lighter regime for MTFs, the draft Directive:

  • aligns the organisational requirements for MTFs and RMs so that those RMs and MTFs operating similar businesses of a similar size are subject to equivalent organisational standards and regulatory oversight.  MTF operators should also have in place more detailed arrangements to identify and manage conflicts of interest and risk management systems for the technical operations of their systems. In addition, MTF operators required to have equivalent system and control regarding the operation of their system, the conduct of participants utilising the MTF and monitoring obligations.
  • to address risks to investors’ resulting from a number of trading venues in the EU trading the same instruments, is introducing a requirement that if one trading venue (MTF, OTF or regulated market) suspends or removes an instrument from trading it should make public that decision and should also communicate that information to other regulated markets, MTFs and OTFs trading that instrument as well as the regulator. Other trading venues that trade that instrument should do likewise, unless continuing trading can be justified in exceptional circumstances.
  • strengthens market surveillance by requiring operators of regulated markets, MTFs and OTFs trading the same financial instruments to cooperate on market surveillance to better detect market abuse etc.
  • introduces requirements to formalise and improve the exchange of information and the cooperation of trading venues when exceptional conditions exist in relation to a financial instrument that is traded on various venues.
  • requires the market operator to set position limits for those trading commodity derivatives where appropriate and publish a weekly report of the aggregate positions of traders in emission allowances and commodity derivatives.
  • requires the market operator of the MTF to make public the price, volume and time of the transactions executed in respect of bonds and structured finance products admitted to trading or for which a prospectus has been published.
  • requires the market operator of the MTF to be subject to pre-trade and post-trade transparency requirements on same basis as RMs and OFTs (including on extended basis of obligation).
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