ITALY: Amendment to Market Rules and Related Instructions of the SeDeX Market

Friday April 22 2016

By resolution n. 19443 of the 18th November 2015, Consob approved the amendments to the Market Rules previously passed by Borsa Italiana Board of Directors on the 14th October 2015. The Instructions to the Rules were consequently amended. 

These amendments will enter into force on 16th May 2016, subject to the positive results of the tests. 

The amendments have introduced the following: 

A new market model 

Trading in the SEDEX market can be characterized by broad price swings, as a result of the nature of the instruments traded there, such as those with optional and/or leverage components. 

In view of this, new conditions for contract execution are established, which may only be concluded in the presence of a specialist, and only within the limits of those quotes posted by said specialist. This measure is designed to preserve investors’ interests and permit the formation of prices in line with the theoretical value of the traded instrument.

More specifically, the changes establish that contracts may only be entered into within the range of the quotes posted by the specialist (including the extreme values). This provision permits contracts to be entered into with the specialist, or with other market participants displaying the same or a better price. 

The introduction of pre-trading 

In order to permit specialists to expose themselves in time for the opening of trading on the SEDEX market, a pre-trading session for specialists is introduced, prior to the phase of continuous trading. From 8.45 to 9.05 (starting of the trading phase), specialists may enter, amend or cancel quotes and starting from the penultimate minute of the same phase they will be obliged to respect the quotation obligations. 

The start of continuous trading, moreover, is delayed by five minute. Thus contracts may be concluded from 9.05 to 17.30. In this regard, it should be pointed. 

New methods of calculating static, dynamic and reference prices 

The static price and the dynamic price shall be calculated by means of a new method that takes account of the specialist’s quotes, published at the end of the pre-trading phase. In the specific case of the SEDEX market, the static price is set equal to the average price of the specialist’s quotes, existing at the end of the pre-trading phase. Should it prove impossible to determine a price, the static price shall be set at the reference price of the previous day, until the first contract is concluded, and subsequently it shall be set at the price of this first contract. 

Review of the specialist’s obligations 

Further amendments include, a maximum time for the resetting of quotes of 1 minute, rather than 5 minutes. Additionally, spread obligations have been extended to the entire market, and thus also to those instruments belonging to the structured/exotic covered warrant segments and to class B investment certificates. 

Bid only specialist 

With reference to obligations of bid-only specialists of SEDEX market, article IA.7.4.1 is modified in order to cancel the provision that imposed segregation of the quoting activity through the use of specific access codes. This is no longer necessary since the introduction of the so called “single sided quote” and without prejudice to the existing right for market participants to segregate specific trading activities using different access codes. 

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