Wholesale trading venues for government bonds and multilateral trading facilities for euro-denominated deposits

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Market supervision

The Bank of Italy is responsible for supervising:

  • wholesale trading venues for government bonds;
  • multilateral trading facilities for euro-denominated deposits.

Given the trading activities performed, the large number and diversity of the participants, and the need to redistribute liquidity within the banking and financial system, these markets play a significant role in monetary policy transmission and financial stability.

The Consolidated Law on Finance (TUF) assigns direct supervisory responsibilities to the Bank of Italy and Consob for wholesale trading venues for government bonds (Article 62-ter): to the former, with the aim of ensuring overall market efficiency and orderly trading; to Consob, with the aim of ensuring transparency, orderly trading, and investor protection. To coordinate their supervisory functions and to reduce to a minimum the regulatory burdens on supervised trading venues, the Bank of Italy and Consob stipulated a memorandum of understanding on their respective duties and on the methods for cooperation and for exchanging information.

The Ministry of Economy and Finance, after consulting the Bank of Italy and Consob, is empowered to establish specific requirements for government securities wholesale trading venues and their managers, to identify additional trading modalities and/or category of operator admitted to these venues, and to define the criteria for assigning the status of primary dealer to entities operating on trading venues for government securities (Article 62-bis). After consulting the Bank of Italy and Consob, the Ministry of Economy and Finance can also authorize regulated wholesale markets in government bonds and approve their internal regulation (Article 62-quater).

The TUF also attributes to the Bank of Italy sole responsibility for supervising the efficiency and proper functioning of the multilateral trading facilities for euro-denominated deposits, as well as their managers (Article 62-septies).

The Bank may request periodic communication of data and documents from the managers of the wholesale trading venues for government bonds and from the multilateral trading facilities for euro-denominated deposits, as well as from the participants of these markets. Under the powers conferred by the Consolidated Law on Finance, the Bank of Italy has issued Supervisory Instructions, which specify the documents that supervised entities must transmit periodically to the Bank for the purpose of its supervision of market management companies, to ensure that the way in which they are structured and their conduct guarantees efficient and orderly trading (see Market supervisory activity: objectives and instruments).

The TUF (Article 62-quater) also assigns an advisory role to the Bank of Italy vis-à-vis Consob as regards the regulation and authorization of wholesale trading venues for private and public sector securities (other than government bonds), as well as of money market instruments and financial derivatives backed by public sector securities, interest rates and currencies. Moreover, the Bank of Italy, together with the Ministry of Economy and Finance and Consob, is the competent authority for ensuring the transparency of government bond transactions.

Finally, the Bank of Italy cooperates with the Ministry of Economy and Finance for the assessment of Specialists in Government Securities (Ministerial Decree No. 216 of 22 December 2009). In this connection, it assesses the contribution of each Specialist to the liquidity and overall efficiency of the secondary market in government securities, measuring it based on parameters such as the number of listed and traded securities, the bid-ask spread, and the activity carried out in its capacity as market maker.

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Markets supervised by the Bank of Italy

The Bank of Italy is currently responsible for the supervision of:

  • MTS Italy, the regulated wholesale market for government securities, divided into two segments (Cash and Repo);
  • MTS Depo, the multilateral trading facility for euro-denominated money deposits.

Both markets are managed by MTS SpA, the company that also directly manages three multilateral trading facilities for bonds, supervised by Consob: BondVision Europe, MTS Cash Domestic Market, and EBM.

MTS SpA also controls EuroMTS Ltd, which manages the MTS UK and Bondvision UK multilateral trading facilities, and MMI Inc, which manages the US market BondsPro.

The current configuration of the markets supervised by the Bank of Italy reflects the long process of development of Italy’s financial markets that started in the late 1980s (see The development of the markets in Italy: historical framework).

MTS Italy - Cash segment

MTS Italy Cash is an interdealer market for cash trading of Italian government bonds. This platform can be joined by banks and investment firms that possess specific minimum capital and professional requirements. The market makers commit to quote on the market, on an ongoing basis and whilst respecting the timing and rules established by MTS, purchase and sale proposals for the financial instruments assigned monthly by MTS.

MTS Italy - Repo segment

MTS Italy Repo is a market for the negotiation of Repos on Italian and foreign government bonds, in which all participants can enter purchase or sale proposals. Two types of contracts are available: General Collateral Repo and Special Repo. In the General Collateral Repo segment, the securities used as collateral are identified after the contract is concluded, from a predetermined basket of assets (i.e. a list of securities identified by ISIN codes). In the Special Repo segment, the counterparties of the transaction decide which specific activity is used as collateral (i.e. identifying a specific security).

In both the spot (Cash) and repurchase (Repo) segments, the function of market registration of bilaterally agreed transactions (Trade Registration) is available; a central counterparty service is also offered, jointly provided by Cassa di compensazione e Garanzia SpA  and LCH.

MTS Italy - Depo

Starting on 6 April 2020, MTS SpA launched a multilateral trading facility for euro- denominated money deposits (MTS Depo), in which transaction settlement in euro takes place automatically through a direct connection (Straight To Processing) to the Target2 real time wholesale settlement system.

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Community legal framework

Italian law - Secondary sources

Related Topics

Central counterparty

Cassa di Compensazione Garanzia (CC&G) is the Italian central counterparty. In the markets that envisage this service, the central counterparty is interposed in each transaction so that intermediaries are not exposed to counterparty default risk.