Definition
A Multilateral Trading Facility (MTF) is a trading platform in the European Union that enables multiple third parties to buy and sell financial instruments. Unlike a regulated exchange, an MTF is operated by investment firms or market operators and offers a venue for trading of various securities, including stocks, bonds, and derivatives. MTFs are defined and regulated by the Markets in Financial Instruments Directive (MiFID), which became effective in 2007.
Examples
- Chi-X Europe: One of the most well-known MTFs in Europe, facilitating the trading of a broad range of equities from across Europe.
- Turquoise: Owned by the London Stock Exchange Group, Turquoise offers trading in shares across 19 European countries.
- BATS Europe: Part of Cboe Global Markets, providing trading services for European equities.
Frequently Asked Questions
What differentiates an MTF from a regulated market?
MTFs are less regulated than traditional stock exchanges and often provide lower trading fees. MTFs are designed to provide more flexible trading options, often utilizing advanced electronic trading technologies.
How do MTFs benefit investors?
MTFs offer better price transparency and lower transaction costs, which can lead to improved liquidity and potentially better trading outcomes for investors.
Are transactions on MTFs anonymous?
Yes, in most cases, MTFs operate with an anonymous order book where buyers and sellers do not know each other’s identities.
What types of financial instruments can be traded on an MTF?
A variety of securities can be traded on an MTF, including stocks, bonds, derivatives, and other financial instruments.
How are MTFs regulated?
MTFs fall under the Markets in Financial Instruments Directive (MiFID) in the EU, which imposes regulatory standards to ensure fair and efficient functioning of these platforms.
Related Terms
Regulated Market
A Regulated Market is a multilateral system operated and/or managed by a market operator that brings together multiple third parties buying and selling financial instruments. It is highly regulated to ensure orderly trading.
Alternative Trading System (ATS)
An Alternative Trading System (ATS) in the United States is a non-exchange trading venue that matches buyers and sellers to find counterparties for transactions. Similar to MTFs, ATSs include electronic communication networks (ECNs).
Markets in Financial Instruments Directive (MiFID)
The Markets in Financial Instruments Directive (MiFID) is a regulation created by the European Union which provides a framework for financial markets, including MTFs. MiFID aims to increase transparency, improve investor protection, and promote competition.
Online References
- European Securities and Markets Authority (ESMA)
- London Stock Exchange: Turquoise
- Chi-X Europe
- Cboe Global Markets: BATS Europe
Suggested Books for Further Studies
- “Financial Markets and Institutions” by Frederic S. Mishkin and Stanley G. Eakins
- “Handbook of International Financial Management” by Michael H. Moffett and Arthur I. Stonehill
- “Market Microstructure: Intermediaries and the Theory of the Firm” by Daniel F. Spulber
Accounting Basics: “Multilateral Trading Facility” Fundamentals Quiz
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