Italian market operator and owner TLX has prepared itself for MiFID, a new European legal framework. When MiFID is introduced in November 2007, TLX is well positioned for growth.

Italy’s financial markets are well developed, and its retail investors are sophisticated.
Unlike their US and UK counterparts, they prefer to manage their own portfolios instead of buying mutual funds. As a result, Italian investors have high demands for the efficient trading of a wide range of securities. Traditionally these needs have been hard to satisfy, particularly in the fixed income market where each banking group has its own internal marketplace, typically with low price transparency and product information.

Alessandro Zignani, managing director of TLX,  believes TLX is well positioned for growth.

That scenario will change with the introduction of the pan-European Markets in Financial Instruments Directive (MiFID) in November 2007. As competition increases in the European financial markets, TLX, an Italian market owner and operator, is well positioned for growth. Operating since January 2003, TLX is jointly owned by UBM, the investment bank of the UniCredito Group, and Banca IMI (Sanpaolo IMI Group). TLX operates two markets targeted specifically to the demands of retail investors: TLX, a regulated market and EuroTLX, an Alternative Trading System [or a Multi-lateral Trading Facility (MTF) under MiFID].

»We can provide a high quality service to the banks at a more competitive price.«

It is run as a nonprofit utility earning money on the spreads, as its owners are also market makers on all instruments traded. They post competitive bids and offers on TLX during normal trading hours, while pre- and post-trade information is posted on the TLX web site (www.eurotlx.com). Around 1,800 instruments are traded on the two markets, including corporate and structured bonds, US and European government securities, sovereign emerging markets bonds and European and American equities.

TLX sees MiFID as a way to gain competitive advantage in Europe. Its strategy is to first gain critical mass in Italy by leveraging its two market makers to attract order flow and offer best execution for retail investors. Another advantage offered to the brokers is that there are no fees for membership and trading.

Next, it wants to expand domestic participation on the platform. Once MiFID takes effect, every Italian bank must decide whether to invest in its internal markets, close that business, or find a partner. TLX’s vision is to offer the Italian banks a cost-effective solution by sharing its infrastructure, including its hardware, network, application and system software, and taking advantage of outsourcing opportunities.

Then more financial instruments will be added to the platform. TLX does not plan to offer domestic equities; however, it will continue to offer a small selection of US and European blue chips that can be settled domestically.

“We can offer retail investors good liquidity on foreign equities,” says Alessandro Zignani, managing director of TLX. “Currently, it is expensive for the banks to go through a foreign broker to execute a cross-border transaction. We can provide a high quality service to the banks at a more competitive price.”

Finally, Zignani believes TLX’s business model will entice European banks to participate as market makers. Since the market makers are also the shareholders, they have a strong commitment to ensure the platform’s success.

The challenge:

The solution:

By Sherree Decovny Photo Courtesy Of Tlx

MarketView 2007:1