ETC/ETN - requirements and listing process
Listing Requirements
Articles 2.2.20 e 2.2.22 of the Rules of the markets organised and managed by Borsa Italiana S.p.A (following the "Rules") define the requirements respectively of the issuer of financial instruments. In the Instruction accompanying the rules there is the application model for the listing of financial instruments in the ETFplus market which shows the documentation that must be added to the listing application.
The securized derivative financial instruments that may be admitted to listing on the ETFplus market must be issued on the basis of a prospectus drawn up in accordance with Directive 2003/71/CE and approved by Consob or, in the case of an issuer subject to foreign law within the European Union, by an equivalent foreign Authority and duly passported in Italy. The ETCs/ETNs must be freely negotiable and can be settled by Euronext Securities Services Milan.
Issuers requirements
An Issuer may be admitted to listing the ETCs/ETNs that are issued by Italian or foreign companies or entities whose exclusive corporate purpose is to make one or more issues of financial instruments and that has published and filed, in compliance with national law, the solo and, where applicable, consolidated annual accounts for the latest two financial years (or of the last financial year if the issuer has been in operation for a shorter period), of which at least the latest must be accompanied by an auditor’s opinion drawn up in accordance with Article 156 of the Consolidated Law on Finance or the corresponding applicable provisions of foreign law. Admission to listing may not be granted where the auditing firm has rendered an adverse opinion or a disclaimer. In the case of recently created issuers Borsa Italiana may accept, instead of audited annual accounts, a balance sheet and income statement for a period of less than one year provided they have been audited. The issuer must also have appointed a firm to audit the annual accounts for the current year at the date the application for admission to listing is submitted.
ETCs/ETNs requirements
ETCs/ETNs may be admitted to listing provided the following conditions are satisfied:
- the characteristics of the instruments must be clear and unambiguous and permit a correlation between the price of the financial instrument and the price or other measure of the underlying; Borsa Italiana may require the issuer to specify the percentage composition of the various components of the financial instrument and the commissions;
- where settlement in cash is envisaged, the procedure for fixing the settlement price must guarantee that such price correctly reflects the price or other measure of the value of the underlying. The provisions of the Instructions shall also apply;
- provision must be made for adjustments where extraordinary events occur regarding the underlyings. Such adjustments must be based on generally accepted methods and tend to neutralise the distortionary effects of the event as far as possible. The issuer must undertake to notify such adjustments to Borsa Italiana, for dissemination to the market, appropriately in advance of the date on which the adjustments will take effect.
- the assets acquired with the proceeds deriving from the subscription of an issue must constitute, to all intents and purposes, an independent pool of assets separated from that of the issuer;
- the assets acquired with the proceeds deriving from the subscription of an issue and the income earned on such assets must be assigned exclusively to satisfy the rights incorporated in the financial instruments and possibly to meet the costs of the transaction;
- actions may not be brought against assets acquired with the proceeds deriving from the subscription of an issue by creditors other than the holders of the financial instruments in question.
- provision must also be made, at least for some categories of qualified intermediaries, for the subscription or the redemption on a continuous basis by delivering the financial instruments or commodities that make up the assets or an equivalent amount of cash. To this end there must be adequate provisions for the settlement and delivery of the underlying.
Liquidity support
Specialist
In accordance with article 2.3.18, for the listing of ETCs/ETNs there must be at least one specialist that undertakes to support the liquidity of the ETCs/ETNs for which application for listing has been made. In detail the specialist must display continuous bid and ask prices with a minimum quantity and a maximum spread established by Borsa Italiana in accordance with article IA.8.2.7 paragraph 3 of the Instructions. The specialist is also obliged to restore quotes in the event of a total or partial hit on the book. Borsa Italiana monitors the performance of these obligations on a continuous basis. The specialist function must be performed by an intermediary that is an ETFplus market member able to post executable quote types of orders (simultaneous bid and ask prices). In case the specialist function is covered by an intermediary not yet specialist on the ETFplus market some simple tests must be executed in order to verify this functionality. Specialists will benefit from a total exemption from the trading fee.
Liquidity provider
The liquidity of the ETCs/ETNs may also be supported by some intermediaries defined as "liquidity providers" that, although not having quotation requirements, display bid and ask prices in order to contribute to the width (also called breadth) and depth of the trading book. Borsa Italiana grants these intermediaries a monthly total/partial discount from the trading fee in the event they reach a minimum market share on the relevant ETC/ETNs. The presence of liquidity providers is optional and an ETC/ETNs could be supported by more than one.
Disclosure requirements
a) the official value of the ETC/ETNs;
b) the number of ETCs/ETNs outstanding.
ETFs Listing Italy - etfitaly@borsaitaliana.it