Equities
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15
STRUCTURE ORGANISATION AND OPERATION
OF THE SPANISH SECURITIES MARKET
B. Exchange traded funds
Exchange traded funds (ETFs) are hybrid investment
instruments that combine the diversification offered by
a fund portfolio with the flexibility of being able to buy
and sell participations in the fund via a simple stock mar-
ket transaction.
ETFs are investment funds, shares in which are tra-
ded and settled in exactly the same way as shares. Unlike
holdings in traditional funds, which can only be bought
or sold at net asset value (total value of the fund portfolio
- expenses /no. of holdings), which has to be calculated
after each session closes, ETFs are bought and sold on
the stock market like any other stock, with the same fees.
The liquidity of ETFs is basically the same as a stock
portfolio comprising a benchmark index. Access to this
liquidity is guaranteed via specialised market intermedia-
ries who undertake the commitment to provide bid and
ask prices at all times during the session. Both the diffe-
rential between the two prices (spread) and the depth,
or the volume of the securities offered or demanded,
must remain within the parameters established prior to
admission to trading and which will be overseen by the
exchange.
The second main feature of ETFs is that they are
indexed funds, in other words their investment strategy
involves replicating the performance of a certain ben-
chmark index (IBEX 35, EuroStoxx 50, Nasdaq 100, DJ
Industrial Average etc.). As the supply of indices has in-
creased so has the variety of ETFs.
The number of ETFs traded on the Spanish market
has increased notably since 2011 and it is now possible
to invest in over 70 such instruments which offer access
to a wide range of asset classes (equities, fixed income,
commodities) and bullish or bearish investment strate-
gies. In 2011, the first IBEX 35 Double Inverse and Dou-
ble Leverage ETFs as well as the IBEX 35 with Dividends
Net ETF were lauched.
The regulations for this trading segment are desig-
ned to allow the technical integration of all ETFs in the
order (general trading), block and special transactions
equities markets while incorporating differentiating fea-
tures, thereby combining flexible regulations with the
agility of implementing this segment in the System. In
any case, trading in this segment incorporates a type of
special operations for the subscription and redemption of
holdings in listed investment funds as well as offering a
specialised intermediary as a member which helps boost
the liquidity of these stocks. Trading in this segment may
also be interrupted by events affecting the instruments’
underlying assets.
ETFs began trading on the SMART platform, within
the electronic trading platform, in February 2010. Imple-
mentation of this platform, which is widely used in inter-
national markets, has allowed BME to improve trading
volumes by providing capacity for more trades per se-
cond per market member, and features greater flexibility
and efficiency in entering combined buy-sell positions.
Below is the market model for ETFs in the electronic tra-
ding platform since the introduction of Circular 1/2011
of 24 November.
Market times
General trading is carried out between 8.30am and
5.35pm with an opening auction between 8.30am and
9.00am as well as an open market between 9.00am and
5.35pm. The opening auction has a 30-second random
end period.During this period orders can be entered, al-
tered and cancelled, but no trades can be executed. Du-
ring the auction period the break-even price is shown
at all times with trading commencing once the auction
period has ended. The price set in the auction will be
the opening price.
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