Stock exchange and other trading venues
The term trading venue refers to a system and service in which buy and sell orders for the securities and/or derivatives of multiple parties are matched. Trading venues include regulated markets (stock exchange), multilateral trading facilities (MTF) and organised trading facilities (OTF). It is also possible to trade securities in other ways, such with a systemic internaliser (SI) or in off-exchange trading (over-the-counter, OTC).
In Finland, there is currently one regulated market, the Helsinki Stock Exchange, and one multilateral trading facility, First North Finland. Both of the aforementioned are operated by Nasdaq Helsinki Ltd, which is part of the international Nasdaq Group.
A stock exchange (regulated market) is a trading venue where the shares, bonds, derivative contracts and many other different financial instruments of publicly listed companies are traded. Trading is based on customers’ buy and sell orders submitted by investment service providers. These orders are matched into trades in accordance with the rules of the stock exchange.
Only members of the stock exchange and entities acting on their behalf or in their name can trade directly on a stock exchange. The Helsinki Stock Exchange may grant trading member rights to Finnish investment service providers and to investment service providers correspondingly authorised in another EEA state which fulfil the requirements set out in law and in the rules of the stock exchange.
In addition to stock exchange operations, an operator of a regulated market may operate, for example, a multilateral trading facility and an organised trading facility, provide reporting services, and engage in other closely related activities. By virtue of separate regulations, a stock exchange may act as a clearing party and carry out the activities of a clearing corporation as well as act as an account operator.
A stock exchange must have rules detailing, for example, trading procedure, the admission of a share or other financial instrument to trading and the requirements imposed on issuers of securities and trading members. Stock exchange rules and changes to them are approved by the Ministry of Finance.
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Multilateral trading facility (MTF)
A multilateral trading facility (MTF) is a more lightly regulated trading venue than a regulated market. Requirements for issuers of financial instruments admitted to trading on an MTF are lighter in relation to disclosure obligations and operating history than for issuers of financial instruments whose financial instruments are traded on a regulated market. It is also possible, for example, to admit shares for trading on an MTF without the company’s own consent.
Currently, the only MTF operating in Finland is First North Finland.
An MTF must have at least three active trading parties. Admission as a trading party must be based on transparent and non-discriminatory rules.
Only a stock exchange, credit institution, investment firm or the branch of the third-country firm can be an operator of multilateral trading. An investment firm engaged in operating multilateral trading may also maintain and provide reporting services in accordance with the Act on Trading in Financial Instruments as provided for separately.
An MTF must have rules detailing, for example, trading procedure, the admission of a share or other financial instrument to trading and the requirements imposed on issuers of securities and trading parties. The rules of an MTF are not approved by an authority.
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SME growth market
An SME growth market is an MTF that meets certain additional requirements. Companies whose shares (or other financial instruments) are listed on an SME growth market receive certain regulatory reliefs. In an SME growth market, at least half of the issuers whose financial instruments are admitted to trading are small or medium-sized enterprises (SMEs). SME means an enterprise whose average market capitalisation was less than EUR 200 million on the basis of end-year quotes for the previous three calendar years.
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Organised trading facility (OTF)
An organised trading facility (OTF) is a trading venue to some extent more lightly regulated than a multilateral trading facility and which is not a regulated market or a multilateral trading facility. An operator of an OTF has more discretion than an operator of an MTF, for example in how orders are matched into trades. Organised trading can be arranged only in bonds, structured finance products, emission allowances and derivative contracts.
An OTF must have at least three active trading members. Admission as a trading member must be based on transparent and non-discriminatory rules.
Only a stock exchange, credit institution, investment firm or the branch of the third-country firm can be an operator of organised trading. An investment firm engaged in operating organised trading may also maintain and provide reporting services in accordance with the Act on Trading in Financial Instruments as provided for separately.
An OTF must draw up and keep available to the public rules detailing, for example, trading procedure, the admission of a financial instrument to trading and the requirements imposed on issuers of securities and trading parties. The rules of an OTF are not approved by an authority.
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A systematic internaliser is an investment firm which deals on own account when executing client orders outside a regulated market, an MTF or an OTF without operating a multilateral system. An SI is not allowed to bring together third-party buying and selling interests in functionally the same way as a trading venue nor to use an internal matching system which executes client orders multilaterally.
An SI decides on the basis of its commercial policy and in an objective and non-discriminatory way the clients to whom it gives access to its quotes. Only an investment service provider, as referred to in the Act on Trading in Financial Instruments, can operate as an SI. The same legal entity cannot, however, be an operator of an OTF and an SI.
Provisions on an SI’s obligation to publish firm bids or offers for a share reflecting prevailing market conditions, on an SI’s obligation in relation to the execution of client orders and on an SI’s client relationships are set out in the Act on Trading in Financial Instruments.
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