MTF's & OTF's

Multilateral trading facilities (MTFs) and organised trading facilities (OTFs) are important multilateral electronic trading venues that were originally created under MiFID in the case of MTFs and MiFIDII in the case of OTFs. Most MTFs are operated by market operators and large investment firms whilst OTFs are operated by investment firms. Both types of venues were created to increase transparency around dark pools under strict rules governed by MiFID. 

MTFs can trade all asset classes on non- discretionary rules but are not allowed proprietary or matched principal trading on the platform. OTFs are restricted to trading non-equity asset classes such as fixed income and derivative instruments but are allowed a level of discretion in trade matching. OTFs are allowed to trade on a proprietary basis in non-liquid sovereign debt and trade on a matched principal basis in non-equity instruments that have not been declared subject to clearing obligations under EMIR.

The UK investment firm prudential regime (IFPR) will bring about several changes to the capital adequacy requirements for MTFs and OTFs key amongst which is a significant drop in initial capital requirement (ICR) to£150K from €730K in what seems to be an easing of capital requirements for trading venues. This might help stimulate the setup of smaller trading venues and could possibly see a shift from matched principal trading to multilateral trading systems.
We have specialist expertise in MTF authorisations and compliance support including compliance with technical standards. Our combined
expertise in regulation, compliance, and risk enables us to provide fully bespoke compliance solutions to firms looking to set up and operate trading venues.

We are currently the trusted regulatory, compliance, and risk partner to two innovative Multilateral Trading Facilities operating in the FICC space.

How Pillar 4 Can Help

Authorisation

         Initial assessment of your MTF or OTF authorisation business model

         Bespoke advice and guidance to navigate the authorisation process including MDP  application process

         Guidance on MiFIR pre/post trade transparency

         Help structuring a suitable governance structure

         Compliance with market abuse regulations 

         Compliance with regulatory technical standards applicable to the business model and  asset classes

         Implementing a suitable ICAAP including pillar 2 elements and wind down

         Implementing practical and workable risk management, capital monitoring, and reporting tools

         Staff skills and competency assessments

         Preparing for pre-application meetings

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IFPR implementation

         Assessment of the impact of IFPR

         Financial modelling and full implementation of the IFPR and shift from ICAAP to ICARA

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Risk management

         Developing integrated risk management, capital monitoring, and reporting tools

         Developing suitable pillar 2 approaches

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On-going compliance support

         Providing specialist advise

         Revamping compliance monitoring programmes to something practical and workable in line with regulations

         Providing risk based on-going compliance monitoring and testing            

         Support in regulatory reporting and capital adequacy reporting