Migration onto TradElect

Today, Monday 10 November, Borsa Italiana’s MTA and Expandi markets successfully migrated onto TradElect, the London Stock Exchange’s trading system. The migration represents a significant milestone in the integration process between Borsa Italiana and the London Stock Exchange and a single, world-class trading system now joins the two markets, creating Europe’s deepest pool of liquidity, generating new trading opportunities and greater efficiencies for the market as a whole.

TradElect came into live service for the London market in June 2007 and contributed to the strong growth in trading volumes in London last year.

Today also sees the introduction of some changes to automatic price monitoring and reference price definition.

The most significant changes are:

Automatic price monitoring

Provision is made for the automatic control of market prices using two mechanisms:

• the maximum price variation limit for contracts with respect to the static price (during the auction and continuous trading phases);
• the maximum price variation limit for contracts with respect to the dynamic price (only during the continuous trading phase).

The static price is either:

• in the case of the opening-auction phase; the previous day’s reference price, or;
• the price at which contracts were concluded in the auction phase, at the end of each auction phase. If no auction price is determined, the static price is equal to the price of the first contract concluded in the continuous trading phase.

The maximum variation of the price of contracts with respect to the static price is +o- 5% for constituents of the S&P/MIB index, +o- 7.5% for other shares and shares in closed-end funds, +o- 30% for warrants and rights, +o- 5% for convertible bonds.

The dynamic price is given by:

• the price of the last contract executed during the current session;
• the previous day’s reference price if no trades have been executed in the current session.

The maximum variation of the price of contracts with respect to the dynamic price is +o- 2.5% for constituents of the S&P/MIB index, +o- 3.5% for other shares and shares in closed-end funds, +o- 5% for warrants, +o- 15% for rights and +o- 2.5% for convertible bonds.

If, during continuous trading, the price of the contract that is being concluded exceeds one of the two price variation limits defined above (the static and dynamic price limits), provision is no longer made for the book to be frozen for 5 minutes, but a so-called “volatility auction” phase is automatically activated. The duration of the volatility auction phase shall be equal to 10 minutes plus a variable interval of up to one minute, determined automatically on a random basis by the trading system.

Reference price

The reference price, which is currently the weighted average price of the final 10 per cent of the quantity traded in the session, will from Monday 10 November be equal to the closing-auction price.  If it is not possible to determine the closing-auction price, the reference price shall be the weighted average price of contracts concluded in the last ten minutes of the continuous trading phase.

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