Banking and Financial, Italian Bond Markets, Corporate Bonds, new features, strengths
MOT
The MOT was established in 1994 to facilitate the access of the private investor to the bond market and to make the efficiency of professional investors more efficient by offering them an electronic and fully automated trading system from the phase of entering the trading proposal until the liquidation of the contract executed. The MOT market has recorded constant growth, also due to the increasing number of connected operators (either directly or through interconnection), such as to position itself firmly in first place in Europe in terms of contracts and traded countervalue.
ExtraMOT
ExtraMOT, the multilateral trading system, saw the light in the second half of 2009 to meet the need of operators and investors to be able to trade Eurobonds in an electronic and automated market able to guarantee, using the same technological platform and the same safeguards of MOT, transparency and efficiency in the price formation mechanism (as opposed to the opacity that often characterizes the Over The Counter markets, ie not regulated).
Strengths
1. MOT: the only regulated market in Italy
2. Transparency in the price formation mechanism
3. Pre and post trading information
3. Monitoring in real time on the correct conduct of negotiations
4. Speed of execution of transactions
5. Price policy always attentive to the needs of different market players.
The methods of negotiation
The quotation of the instruments traded on MOT and ExtraMOT is expressed in percentage terms on the nominal value of the bond placed equal to 100. The price thus changes from below par value if the percentage price is lower than 100, at par if the price is equal at 100 or above par even if more than 100.
The prices of the bonds can be “dry” or “tel that”. For each instrument traded Borsa Italiana spreads an official price and a reference price on a daily basis.
Dry rate: the price of the stock that is formed on the secondary market expresses exclusively the value of the obligation with respect to its nominal value; this price does not incorporate, therefore, the interests that the bond has hitherto accrued.
Consequently, in order to determine the countervalue of a contract concluded from the stock, the accrued interest rate up to the settlement day must be added to the contract price. Thus they negotiate the bonds whose coupon is already known at the beginning of each interest period (usually the simplest securities such as, for example, fixed and floating rate securities).
Tel that: the price of the stock formed on the secondary market already expresses the countervalue to which the negotiated contract would be liquidated (ie the price of the security includes the estimate of the value of the coupon being accrued). For example, structured bonds are paid for “tel quel”, the remuneration of which is linked to the performance, for example, of shares, indices or currencies.
Reference price: it is equal to the weighted average of the contracts concluded during the last 20 minutes of the continuous trading phase, also relevant for the purpose of monitoring the negotiations and for the price control mechanisms of the proposals.
Official price: this is the weighted average price of the entire quantity of the instrument traded on the market during the session.
MOT – new features
Distribution channel: after the success of the first issues of BTP Italia, Borsa Italiana has also extended to corporate issuers the opportunity to distribute their securities directly through the platform. The innovative process provides for an initial distribution period in which contracts are concluded conditional upon the successful completion of the transaction. At the end of this period and verified the satisfaction of all the conditions necessary for the issuance of the instruments, the admission to the market becomes definitive and the starting date of the negotiations is established.
Bonds on bonds: on the trading platform of the MOT market, public tender offerings on bond instruments are possible.
Source Borsa Italiana
