Spanish bourse to establish retail bond trading platform

Source: BME

Bolsas y Mercados Españoles (BME) has created, through its Fixed Income Market (AIAF), an electronic trading platform for bonds geared to retails investors, which will start operations on May 10th under the name Sistema Electrónico de Negociación de Deuda (SEND). The new platform is a major step towards enhancing the transparency and liquidity of the Spanish Corporate Debt Market.

Fixed Income markets in general and Corporate Debt markets in particular, have acquired a significant size over the last few years, posting strong growth in the number of trades executed on trading volumes of less than €10,000.

The platform is born in a backdrop of greater participation by retail investors and after a long process of design and adaptation to the liquidity and transparency demands for financial markets that have arisen in recent years. These new demands arise both from the market's own developments and from new regulations, particularly MiFID, as well as those emanating from national and international regulators and supervisory authorities.

Through this initiative, BME takes a step ahead of potential requirements for Fixed Income, offering its members a tool with great potential so that they can meet "best execution" criteria for buy-sell orders.

The tool will be of great value for the protection of retail investors, as they will be able to enter and exit the market and buy and sell bonds in an easy, direct and transparent way, in a similar fashion to that on the cash markets and more independently and autonomously.

SEND aims to become an objective reference for information for retail investors about prices of fixed income assets at a time of significant growth of private savings. This circumstance is expected to encourage issuers to tap the market in order to capture part of the said retail investor's savings.

The development of this new platform has been supported by BME's expertise and technology, including the necessary adaptations to the AIAF Fixed Income Market, which is evidence of the tried and tested technology with which retail investors are familiar, and thus they will be able to benefit from quicker and more secure trading.

The Corporate Debt assets eligible for inclusion in SEND are single bonds and obligations, a hybrid product called "participaciones preferentes", subordinated obligations, tax-exempted obligations, coovered bonds and notes with maturities of more than 6 months. Initially, only those issued from 2009, with a nominal amount equal or less than €1,500 and geared to retail investors will be admitted. Other securities previously issued or with a higher nominal amount will also be admitted if this is required by the Issuer or a Market Member.

Additionally, among other listed assets, it will allow for the inclusion of certain domestic and European Public Debt assets as well as other Corporate Debt assets issued on other international markets

The trading system will be order-driven (multilateral) or internally based (bilateral), with operations at maturity and cash-based. The clearing and settlement of trades will take place through Iberclear, the Spanish CSD, through netting. The trading will take place on a continuous basis, from 8:30 hrs to 16:30 hrs.

In order to be eligible for SEND membership, candidates must be members of the AIAF Market, and operate on their own account or on behalf of others. In addition to this, a new figure will be created, that of the Mediating Entities, which, without having to be members of AIAF, will be entitled to operate on behalf of one or more members but not on their own account. The Liquidity Entities are those Members of AIAF with listing commitments on one or several issues and which will be entitled to operate on their own account or on behalf of others.

Francisco Oña, Chairman of AIAF and Director of Fixed Income, BME, stated that SEND "is an initiative of big potential as it will greatly facilitate access to the market to retail investors. Besides, it will be a major step forward in the protection of this investor segment and in the improvement of the market's transparency and liquidity".

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