Structure and Organization of Spanish Markets

The Spanish securities market has undergone a deep process of change and growth over the last 25 years. The technical, operational and organizational systems which support the market today have allowed important investment flows to be channeled through the stock market and provided the markets with greater transparency, liquidity and efficiency.

As a result of the implementation of the Markets in Financial Instruments Directive (MiFID, Directive 2004/39/EC), there have been great changes in the structure and functioning of the European securities markets. The new trading environment is characterized by it being opened up to increased competition, a backdrop in which Regulated Markets work alongside newly created entities, of which the Multilateral Trading Facilities (MTF´s) stands out.

REGULATED MARKETS

MiFID recognizes the regulated market as the benchmark market, and has determined the need for strict requirements to give authorization to regulated markets, as well as dealers and intermediaries. In the case of the Spanish securities market, the transposition of the EU directive into Spanish law was made explicit in the publication of Law 47/2007, which modified Law 24/1988 on the Spanish Securities Market. Further in time and with the aim of gathering all legislative texts published mainly due to the internationalization of securities markets, the Texto Refundido de la Ley del Mercado de Valores was adopted in 2015 (Real Decreto 4/2015).

The Spanish regulated markets have been denominated official secondary markets. For such purposes, the following are considered to be official securities secondary markets: The Stock Markets, the Book-Entry Public Debt Market, the Futures and Options Exchange (MEFF), and the Fixed Income Market, AIAF.

Equities

The Spanish equity market operates on the SIBE electronic trading platform, developed entirely by BME, which guarantees full connectivity of the four Spanish stock exchanges.

The market is based on an order driven system, a single order book and an order matching system that operates on the basis of price-time priority. Apart from shares, warrants, Certificates and Exchange Traded Funds (ETFs) are also traded. Some market segments have specialist liquidity providers.

Futures and Options

Derivative products are traded on the MEFF exchange, which are the underlying assets of individual shares, the IBEX35® index and various European stock indexes. Meff derivatives provide investors with tools to manage risk and to build risk-hedginge mechanisms for all sorts of portfolios.

Fixed Income

The AIAF Fixed Income and Corporate Debt market is a solid source of financing for private sector, public and local bodies in Spain. This market lists and trades a wide range of assets and products that meet the needs of issuers and investors in Corporate Debt, giving issuers the fullest possibilities as regards terms and fund raising strategies, and asset management in the case of investors.

Private and public sector fixed income issues listed on the four Spanish Stock Exchanges are also traded on the SIBE platform. BME also manages a multilateral electronic trading system for Registered Debt issues.

MULTILATERAL TRADING FACILITIES (MTFs)

Multilateral Trading Facilities are those systems which, operated by an investment firm or a managing entity of an official secondary market, have as their only social goal the managing of the system, that gathers, according to its non-discretionary rules, the various buy and sell interests on financial instruments of various third parties. (art 118. Securities Market Law)

Apart from the regulated markets, Multilateral Trading Facilities (MTS) operate in Spain, trading both shares that are listed in regulated markets (Stock Exchanges) and Public Debt issues and Corporate Debt issues. Among those named Multilateral Trading Facilities, the following are of relevance:

The Mercado Alternativo Bursátil (MAB) is designed so that small companies wishing to expand can benefit from the advantages offered by the market: financing, visibility, liquidity, valuations. MAB has a tailor-made regulation and costs and processes specifically designed for the listed companies. The MAB market has different sections or segments for: investment companies with variable capital (SICAVs), real estate investment trusts (SOCIMI) venture capital companies (ECRs), hedge funds (SIL), and small and medium sized companies. This market was established in 2006 with the objective of giving entrance to companies of a smaller size, which otherwise, would not have had the possibility of listing on a market of a greater dimension.

The Alternative Market for Fixed Income (MARF), launched in 2013, is a market mainly designed for institutional investors, and offers fixed income securities of medium sized companies, usually not listed on the stock market.

The Latibex market, created in 1999, is the only international market solely for Latin American stocks. Securities are traded in euros in the Spanish electronic trading system (SIBE) and listed companies provide the very same information they are providing to the regulatory authority of their country of origin.

Bolsas y Mercados Españoles (BME)

Bolsas y Mercados Españoles (BME) is the company that manages the main official secondary markets (regulated markets) in Spain, and other multilateral electronic trading systems. Among the companies integrated in the BME Group, the following are of particular relevance: the Madrid, Barcelona, Bilbao and Valencia stock exchanges, the derivatives market, MEFF, the Fixed Income Market, AIAF, the Central Counterparty (CCP), BME Clearing, and the business unit responsible for the registration and settlement of equity and fixed income securities, IBERCLEAR.

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