Resolution No. 14035

Alternative trading of financial instruments off regulated markets

THE COMMISSIONE NAZIONALE PER LE SOCIETA' E LA BORSA - CONSOB

HAVING REGARD TO Law 216/1974;

HAVING REGARD TO Legislative Decree 58/1998;

HAVING REGARD, in particular, to Article 78 of Legislative Decree 58/1998;

HAVING REGARD TO Consob Communication No. 98097747 of 24 December 1998;

HAVING REGARD TO Consob Resolution No. 12071 of 21 July 1999;

HAVING REGARD TO Consob Resolution No. 12176 of 3 November 1999;

HAVING REGARD TO the recent developments in the alternative trading of financial instruments off regulated markets in Italy and the leading foreign jurisdictions;

HAVING REGARD TO the "Standards For Alternative Trading Systems" adopted by CESR in July 2002;

WHEREAS it is desirable to update the procedures, time limits and conditions for providing Consob and the public with information on the alternative trading of financial instruments off regulated markets;

WHEREAS it is also desirable to extend the requirements concerning the provision of information to the public to the alternative trading of government securities, financial instruments listed on regulated markets and repos;

WHEREAS it is desirable to replace the form for providing Consob with information on alternative trading systems adopted in Resolution No. 12176 of 3 November 1999 in order to bring it into line with the new information that must be transmitted to Consob;

R E S O L V E S:

The attached communication on the procedures, time limits and conditions for the provision of information to Consob and the public on the alternative trading of financial instruments off regulated markets and the attached form for providing Consob with information on alternative trading systems are approved.

The above-mentioned communication and the above-mentioned form shall replace respectively Consob Communication No. 98097747 of 24 December 1998 and the form attached to Consob Resolution No. 12071 of 21 July 1999.

Consob Resolution No. 12071 of 21 July 1999 is repealed.

This resolution shall be published in the Gazzetta Ufficiale della Repubblica Italianaand Consob's Bulletin. It shall enter into force on the fifteenth day following its publication in the Gazzetta Ufficiale.

Rome, 17 April 2003

CHAIRMAN Luigi Spaventa

Subject: Alternative trading of financial instruments - Article 78 of Legislative Decree 58/1998

1. Legal basis

The first paragraph of Article 78 of Legislative Decree 58/1998 authorizes Consob to " require operators, issuers and intermediaries to provide information and records concerning alternative trading of financial instruments". The second paragraph of the same article states that " For the purpose of protecting investors, Consob may: a) establish the procedures, time limits and conditions for providing information on trading to the public".

This communication, which is concerned with systematic alternative trading, has been adopted on the basis of the above-mentioned provisions, takes account of the "Standards For Alternative Trading Systems" adopted by CESR in July 2002 and replaces Consob Communication No. 98097747 of 24 December 1998.

2. Definitions

In this communication:

1) "alternative trading system" shall mean a set of rules and structures, including automated structures, that make it possible, on a continuous or periodic basis:

a) to collect and transmit orders for trading in financial instruments and

b) to match such orders with a view to the conclusion of contracts;

2) "multilateral systems" shall mean alternative trading systems in which multiple entities participate in direct competition among themselves;

3) "bilateral systems" shall mean alternative trading systems in which a single entity displays quotes that can be accepted by other entities.

The operators of alternative trading systems shall ensure that electronic procedures are in place for recording transactions that permit searches to be made on each financial instrument, each type of transaction and each entity admitted to the system.

4. Disclosures to Consob on the organization of alternative trading systems

The operators of alternative trading systems shall send Consob, not later than the day the system comes into operation, the following information in electronic format and using the form provided by Consob:

a) the rules governing the operation of the system, including those governing the formation of prices;

b) the structures used and how they work;

c) the entities admitted to the system;

d) the financial instruments admitted to trading and their issuers;

e) the standard contracts governing the system operator's relationships with the participating entities ⁽¹⁾ and the issuers of the financial instruments;

f) the forms of supervision on compliance with the rules governing the operation of the system and the action contemplated in the event of violations;

g) the procedures and time limits for the settlement of contracts concluded on the system.

The operators of alternative trading systems shall promptly inform Consob, using the procedures described above, of any changes in the information previously transmitted.

5. Disclosures to participants and issuers on the organization of alternative trading systems

The operators of multilateral systems other than those specified in Article 78.3 of Legislative Decree 58/1998 shall ensure that the following information is sent to participants and issuers not later than the day on which the system comes into operation:

a) the rules governing the operation of the system, including those governing the formation of prices;

b) the structures used and how they work;

c) the entities admitted to the system;

d) the financial instruments admitted to trading and their issuers;

e) the forms of supervision on compliance with the rules governing the operation of the system and the action contemplated in the event of violations;

f) the procedures and time limits for the settlement of contracts concluded on the system.

The operators of alternative trading systems shall ensure that participants and issuers are promptly informed of any changes in the information previously transmitted.

6. Transparency of trading

The operators of alternative trading systems other than those specified in Article 78.3 of Legislative Decree 58/1998 shall ensure that the following information is made available to the public:

a) the rules governing the operation of the system, including those governing the formation of prices;

b) during the hours the system is in operation:

- the best buy and sell prices and the related quantities;

- the price, quantity, date and time of the last contract concluded;

Where the rules of the system provide for the prices at which contracts are concluded to be determined in an auction, only the information regarding the price, quantity, date and time of the last contract concluded need be made available.

c) by the start of the next trading day, for each financial instrument:

- the number of contracts concluded;

- the total quantity traded and the value thereof;

- the lowest and highest prices;

- the price of the last contract concluded.

Where access to the system and the collection of orders is performed electronically, the same information shall be made available to the public via the system's terminals. Where this is not the case, the information shall be displayed in the rooms used for the collection of orders or made available to the public by other means ensuring an equal degree of dissemination.

Not later than the third business day of each month the operators of alternative trading systems other than those specified in Article 78.3 of Legislative Decree 58/1998 shall publish an announcement containing the following information with reference to the previous month for each financial instrument admitted to trading:

a) the number of contracts concluded, the total quantity traded and the value thereof;

b) the lowest and highest prices;

c) the weighted average price;

d) the price, quantity and date of the last contract concluded.

Where the rules of the system provide for contracts to be concluded by hitting quotes displayed by participants on own account, the information on the weighted average price of the contracts concluded must be provided separately for purchases and sales.

Not later than the tenth business day of the months of April, July, October and January of each year the operators of alternative trading systems other than those specified in Article 78.3 of Legislative Decree 58/1998 shall send Consob the same information with reference to the preceding quarter.

7. Issuers

The requirements concerning the provision of information to the public and Consob contained in Articles 114, 115 and 116 of Legislative Decree 58/1998 and the related implementing provisions shall be unaffected.

8. List of alternative trading systems

Consob publishes the names of the alternative trading systems in operation in its Bulletin, together with the other information provided by their operators.

INFORMATION ON ALTERNATIVE TRADING SYSTEMS FOR FINANCIAL INSTRUMENTS (*) (Article 78 of Legislative Decree 58/1998 and Consob Resolution 14035 of 17 April 2003)

1.) The standard contracts that system operators are required to send to Consob are only those regarding the working of the alternative trading system, such as liquidity contracts and those by means of which the operator appoints one or more participants to display quotes.