Borsa Italiana market for open-end funds. Borsa Italiana

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1 Borsa Italiana market for open-end funds Page 1 Borsa Italiana

2 A new market for open-end fund trading Objective: creating a new electronic market where investors can buy and sell open-end funds New segment of Borsa Italiana s ETFplus market dedicated to open-end funds Intermediaries already admitted to ETFplus market will have access to open-end funds brought to the market by issuers. NAV of the relevant trading day is the trading price No arbitrage between buy or sell on the market and to be created or redeemed directly with the issuer. Order imbalance (buy or sell) will be executed by the Appointed Intermediary (A.I.) The presence of the A.I. is mandatory in order execute the buy or sell order imbalance. Straight through processing from listing to settlement of dematerialized open-end funds Dematerialized shares/units will be settled in Monte Titoli at T+3, as for all other financial instruments listed in Borsa Italiana

3 The new market for open-end funds - pros The Italian market model is developed with focus on the following points: Fund s issuer is the leading actor, it: submits the listing application; calculates and sends the NAV to Borsa Italiana; appoints the Appointed Intermediary; processes daily creation/redemption. Maximum investor s safeguard: Trading at NAV; Regulated and supervised official market; Borsa Italiana is the main Italian HUB for financial information and data.

4 The new market for open-end funds - details Main features: New market segment of ETFplus market Trading model: auction call from 8:00 a.m. to 3:00 p.m. Not cleared market segment (no central counterparty) Orders must display the quantity only (no price to be inserted, i.e. market orders)* Minimum trading lot is 1 share/unit (no decimals available) The NAV of the relevant trading day is the trading price Order imbalance will be executed by the Appointed Intermediary All the intermediaries already admitted to ETFplus market will be able to trade on this new segment * The trading platform shows a «conventional price» of 1

5 The new market for open-end funds - details A segment of the ETFplus market, the open-end CIU segment, will be devoted to these instruments. There will be admission requirements for open-end CIUs and ongoing disclosure obligations, including the obligation to notify the net asset value (NAV) of the share/unit. The open-end CIUs will be traded through entry on the book of market orders. Buy and sell orders will be matched taking account of the time priorities of the individual orders until the quantities available are filled. For each trading day an intermediary appointed for the purpose will undertake to enter bids and offers for a quantity equal to the difference between the buy and sell quantities on the book. In the last five minutes of trading market, intermediaries other than the one appointed must refrain from entering, cancelling and modifying orders. Contracts will be concluded on the basis of the NAV of the share/unit of the open-end CIU on the trading day of reference and notified by the issuer. Contracts will be sent for settlement via X-TRM on the day following their conclusion and in any case in time for settlement on the third day following their conclusion. Trading will not take place on days when the net asset value (NAV) of the share/unit is not calculated. The transparency of the trading for intermediaries and the public will be ensured by the usual channels. Disclosures will include the conventional price while the data on the contracts concluded, updated with the prices at which they were concluded (NAV), will be provided in the Official List on the day following their conclusion.

6 The new market for open-end funds - details Secondary Market Primary Market buy and sell orders ETFplus buy and sell orders Appointed Intermediary Creation / Redemption Fund Issuer Intermediaries

7 Market structure: quantity auction with Appointed Intermediary participation (1/2) Pre-auction A.I. participation Validation and conclusion of contracts 8:00 a.m. 2:55 p.m. 3:00 p.m. 3:01 p.m. Operating mechanism: Intermediaries can insert buy and sell orders indicating the quantity only (no decimal allowed); only market orders with Daily TIF are allowed. During pre-auction phase (up to 2:55 p.m.) intermediaries can insert, modify and delete orders. During the last 5 minute of pre-auction phase (from 2:55 to 3 p.m.) only the Appointed Intermediary can insert orders (not anonymous) to execute the imbalance between buy and sell quantity. After this phase, the contracts are concluded. The matching of the orders are regulated taking into account orders time priority.

8 Market structure: quantity auction with Appointed Intermediary participation (2/2) Bid N. units Ask Orders are ranked on time priority basis Pre-auction phase: all intermediaries can insert, modify and delete orders for quantity. Bid Ask Last 5 minute of pre-auction phase: the Appointed Intermediary inserts an order to execute the imbalance. During this phase, other intermediaries must refrain from entering, cancelling and modifying orders. The Appointed Intermediary inserts a sell order to execute the imbalance. Validation and conclusion of contracts: after pre-auction phase, the contracts are concluded. Non executed orders will be deleted after the auction (persistent orders are not allowed).

9 Settlement process T: the trading platform sends to Borsa Italiana Reference Data the concluded trades (with «conventional price»). These contracts are temporarily parked and not sent for settlement. T+1: Funds issuers must send to Borsa Italiana until cut-off time (5 pm CET) the funds NAV of day T (Euro denominated) in order to price trades concluded on such day (T). Once priced, the contracts are sent to Monte Titoli for settlement (managed at T+3). T+2: extraordinary process in case of missing/wrong NAV communication T+3: trades settlement

10 Data flow day T Example: buy imbalance ETFplus Buy/sell orders= order flow (1) (2) The Appointed Intermediary executes the Intermediaries imbalance selling 5,500 units Appointed Intermediary (3) The appointed intermediary sends a creation request for 5,500 units Fund Issuer Borsa Reference Data trades parking (4) Contracts with real quantity but conventional price are parked Orders flow Creation flow Trades flow

11 Data flow day T Example: Sell imbalance ETFplus Buy/sell orders= order flow (1) (2) The Appointed Intermediary executes the Intermediaries imbalance buying 5,500 units Appointed Intermediary (3) The appointed intermediary sends a redemption request for 5,500 units Fund Issuer Borsa Reference Data trades parking (4) Contracts with real quantity but conventional price are parked Orders flow Creation flow Trades flow

12 Data flow day T+1 Official list (4) Official data on execution price (NAV), number of contracts and traded quantities (2) Conventional Price is replaced by NAV value Borsa Reference Data trades parking (1) NAV value sent to Borsa by cut-off time Fund issuer (3) T trades priced at T NAV are sent for settlement XTRM presettlement service Monte Titoli Official data flow NAV value flow Sending trades priced at NAV value

13 Data flow day T+3 Buy imbalance - Settlement Fund Issuer M T X Instruction to increase outstanding units Fund Issuer account U N I T S Monte Titoli Appointed Intermediary account U N I T S Intermediaries account Paying bank account Custodian account

14 Data flow day T+3 Sell imbalance - Settlement Fund Issuer M T X Instruction to reduce outstanding units Fund Issuer account U N I T S Appointed Intermediary account Paying bank account Monte Titoli Custodian account U N I T S Intermediaries account

15 The publication of this document does not represent solicitation, by Borsa Italiana S.p.A., of public saving and is not to be considered as a recommendation by Borsa Italiana as to the suitability of the investment, if any, herein described. This document has not to be considered complete and it is meant for information and discussion purposes only. Borsa Italiana accepts no liability, arising, without limitation to the generality of the foregoing, from inaccuracies and/or mistakes, for decisions and/or actions taken by any party based on this documents. Trademarks Borsa Italiana and Borsa Italiana's logo, ETFplus, IDEM, MOT, MTA, STAR, SeDeX, MIB, IDEX, BIt Club, Academy, MiniFIB, DDM, EuroMOT, Market Connect, NIS, Borsa Virtuale, ExtraMOT, MIV BIt Systems Piazza Affari Gestione e Servizi, Palazzo Mezzanotte Congress and Training Centre and PAGS are owned by Borsa Italiana S.p.A. FTSE is a registered trademark of London Stock Exchange plc and The Financial Times Limited and is used by FTSE International Limited under licence. London Stock Exchange, the coat of arms device and AIM are a registered trade mark of London Stock Exchange plc. The above trademarks and any other trademark owned by the London Stock Exchange Group cannot be used without express written consent by the Company having the ownership of the same. Borsa Italiana S.p.A. and its subsidiaries are subject to direction and coordination of London Stock Exchange Group Holdings (Italy) Ltd Italian branch. The Group promotes and offers the post-trading services of Cassa di Compensazione e Garanzia S.p.A. and Monte Titoli S.p.A. in an equitable, transparent and non-discriminatory manner and on the basis of criteria and procedure aimed at assuring interoperability, security and equal treatment among market infrastructures, to all subjects who so request and are qualified in accordance with national and community legislation, applicable rules and decisions of the competent Authorities. November 2013 London Stock Exchange Group plc All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieve system without prior permission from the copyright owners.