011123marketmodel

On December 3rd, several changes in trading procedures will become operative. These are intended to rationalise the exchange's operations and bring them in line with certain European practices.

These changes affect various different parts of Borsa Italiana, namely MTA, Nuovo Mercato, After Hours Market and Mercato Ristretto (Third Market) stock markets; in addition, trading hours for the Covered Warrants Market (MCW) and Stock Derivatives Market (IDEM) will be extended, and the cross-order book phase of the After Hours Market will be eliminated.

In detail, the innovations being introduced can be summarised as:

• introducing the closing auction;

• introducing the control price as the new reference value for automatic control of trades;

• introducing trading orders with "Valid only in Closing Auction" (Vac: Valide solo in Asta di Chiusura) execution procedures;

• changing hidden quantity proposals (iceberg orders);

• changing the time default for trading proposals with "Valid Until Date" (Vsd: Valido Sino a Data) parameter

The closing auction - comprising the pre-auction, validation and auction phases - will extend for 15 minute periods and its starting time varies according to the Borsa Italiana segment/market:

• for shares traded in the blue chip and STAR segments and in the Nuovo Mercato: pre-auction from 17:25 to 17:35; validation and auction matching from 17:35 to 17:40;
• for shares traded in the ordinary Stock Exchange class 1 segment: pre-auction from 16:25 to 16:35; validation and auction matching from 16:35 to 16:40;
• for shares traded in the ordinary Stock Exchange class 2 segment and in the Mercato Ristretto (Third Market): pre-auction from 11:00 to 16:35; validation and auction matching from 16:35 to 16:40.

This is the price according to which the system automatically checks the regularity of trades; unlike the current reference price, it can be updated during the course of the trading session. In particular:

for all MTA, Nuovo Mercato and Mercato Ristretto (Third Market) shares, the control price

1. is equivalent to the reference price of the previous day during the pre-auction, validation and auction opening phases;
2. is the previously fixed opening price during the continuous trading phase. In the event the latter has not been established, the control price remains unaltered (case 1);

for the MCW Market, the control price is equivalent to the reference price of the previous day, whereas for the After Hours Market it is equivalent to the reference price of the day.

A new trading proposal (Valid only in Closing Auction trading proposal) is being introduced. It will be defined as trades which may only be executed during the closing auction. The new allowed value is Vac (Valid in Closing Auction).

The Vac order may only be executed during the closing auction, but can be entered with or without a price limit starting from the beginning of the continuous trading phase of the specified financial instrument. They can be seen in the trading book only starting from the closing pre-auction phase. A time priority less than that of the orders entered and not executed during the opening auction and continuous trading, and greater than that of the orders entered starting from the closing auction, will be assigned to those proposals. Vac orders not executed during the closing auction are automatically cancelled.

The concept of minimum "counter-value" exposure is being introduced for trading orders entered with hidden quantities (iceberg orders), to replace the current parameter set in terms of quantity (number of shares). Iceberg orders will be deemed valid only if the quantity displayed has a counter-value equal to or greater than a minimum counter-value established by Borsa Italiana and set the same for all the financial instruments.

The default maturity value of the "Valid Until Date" (Vsd: Valido Sino a Data) orders is set at 90 calendar days. Therefore, if the Operator fails to give specific instructions, the system will automatically take the current date + 90 calendar days as the date of maturity.

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The following changes will also be introduced as of 3 December:

The continuous trading phase for the equity derivatives market will be extended by 10 minutes (until 17:40) and that of Covered Warrants Market by five minutes (until 17:35).

The current cross-order book phase will be eliminated in the After Hours Market trading system. The starting time for continuous trading will remain unchanged (18:00).

The new Buyer Code field will be introduced for trading proposals on the MTA, Nuovo Mercato, After Hours Market, Mercato Ristretto (Third Market) and MCW market trading systems. This field will be optional and can contain information deemed useful by the Operator.

Introduction of the Buyer Type (Authorised Operator, Interconnected Institutional Customer, Interconnected Private Customer, Interconnected Organisation Unit) field will become mandatory when the trading proposals are entered on the MTA, Nuovo Mercato, After Hours Market, Mercato Ristretto (Third Market) and MCW market trading systems.

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Completion of the EuroBIt Market Model adoption process will continue during the course of 2002 and will include:

• elimination of the minimum trading lot for the Electronic Stock Market shares;
• introduction of random closing of auctions;
• modification of reference price calculation procedures.

The date these changes will come into force, which may differ for each of them, will be established by special Borsa Italiana Provisions.

Milan, 21 November 2001

As of 1 July 2002 it will indicate the closing auction price only for the blue chips segment of the MTA and for the Nuovo Mercato.