The Multilateral Trading System is a system operated by a provider of investment services. Without being a regulated market, an MTS provides defined rules for transactions (purchases and sales) on financial instruments.
The rules of the multilateral trading system are determined by the person who manages it. These rules are designed to ensure a transparent and non-discretionary process which guarantees fair and orderly trading. In addition to establishing objective criteria for the efficient execution of orders.
The person who operates a multilateral trading facility takes all measures necessary to facilitate the efficient settlement of transactions on the system.
The equity brokerage landscape is changing in the wake of the entry into force of the new directives on liberalization of financial instruments. Competition between traditional exchanges and MTFs is raging as participants try to grab a share of brokerage transactions in the equity markets.
The challenge for new players is to answer some dissatisfied investors vis-à -vis traditional exchanges, in particular by ensuring better discretion turnaround times and the reduction of execution costs.
The arrival of new tools generates additional requirements for banks, both in terms of monitoring their customers’ preferences (tools for managing customer relations and support tools to decision making). They provide a solution manage my trade accounts.
Moreover, beyond the aspect of reducing implementation costs, these tools can help improve risk management on markets by providing pre and post-execution transparency on asset classes instead of centralized bargaining. And can be traded in OTCs (such as dark pools). In markets like this, they become, a compliance standpoint, reliable price source.
These encompass all forms of organized execution and negotiation which does not correspond to the functionalities or regulatory specifications of existing platforms (eg platforms running swaps or over-the-counter).
It will also include matching systems orders (broker crossing systems : electronic matching systems in-house orders, operated by an investment firm executing client orders by crossing them with other clients).
The difference between the regulated markets, MTFs and organized trading systems lies in the execution. Regulated markets and multilateral trading facilities are characterized by non-discretionary execution of transactions. However, the operator of an organized trading facility should have some discretion over how transactions are executed.
Given an OTC is a real trading platform, the operator of the platform should be neutral (the rights of clients and together, cannot be jeopardized by the possibility of making profit at their expense). The operator of an OTC should not be allowed to execute in the OTC transactions between multiple third party interests buyers and sellers, including client orders that have gathered in the system against equity.