Regulated markets have a number of advantages for investors, as they are only authorized under strict conditions. In this article, you will find out what exactly a regulated market is, how it differs from other forms, what legal framework conditions apply and how authorization is granted.
Regulated market Definition
A regulated market is State-supervised and organized. It is a trading venue for financial instruments that is organized in accordance with the German Securities Trading Act (WpHG). Securities, bonds and investment funds are traded, for example.
Here apply European, uniform requirements. This means that the corresponding Rules and regulations comparatively strict, so that investor protection, transparency and security can be guaranteed. Investors therefore enjoy special protection on regulated markets, as high quality standards must be observed.
An important characteristic of regulated markets are Disclosure and reporting obligations for listed companies. Such companies must disclose financial reports and other information transparently at regular intervals.
This allows a functioning pricing process guaranteed can be made. In addition, well-founded, fair investment decisions are possible. In addition, there are minimum standards in relation to different areas.
- The strict regulations on regulated markets serve to create a trustworthy environment for investors.
- The objectives are efficient pricing, transparency and investor protection.
Regulated market: Definitions
The regulated market must be legally distinguished from other forms of trading. Compared to the other market forms, the regulated market is the strictest form. Other forms are
- Organized trading systemsThese are platforms with operator discretion when it comes to order execution. Bonds and derivatives are preferably traded here.
- Multilateral trading systemsSecurities service providers or stock exchanges operate these platforms.
- Regulated unofficial marketThis type of trading is less heavily regulated. Suitability is based on lower authorization and follow-up obligations.
Regulated markets and their legal framework
While the legal framework must be based on European requirements, implementation is the responsibility of national law. The European requirements relate to market structure, admission of trading venues, combating market abuse or transparency requirements.
- The legal conditions may vary at national level.
- This applies, for example, to admission processes or participation requirements.
- The fundamental aim is to enable an efficient and transparent market.
In order to achieve this goal, the regulated market must be monitored. This takes place in a multi-stage process. The fight against market abuse and compliance with financial market law are the responsibility of the state financial supervision. Control at country level Stock exchange supervisors day-to-day operations. Finally, the Operators of stock exchanges responsible for ensuring that approval procedures and regulations are complied with and that the market is monitored.
The market must be monitored so that, for example Insider trading can be avoided. Also unusual price movements or Market manipulation must be monitored and checked. Possible penalties include fines, suspensions or recalls of approvals.
Regulated markets and their authorization
Admission procedure regulate which issuers can participate in the regulated market and which financial instruments may be made available for trading. In order to obtain admission, the company history, the structure of the organization and other requirements are checked, for example.
In order for an issuer to have a permanent license, it is necessary, for example, to issue a approved prospectus at regular intervals. This is a document containing important data such as the financial instruments offered, the economic situation and other aspects. The document is then carefully reviewed and approved by the responsible supervisory authority.
The admission itself leads to a whole series of obligations that issuers must take into account. These include, for example Ad hoc commitment. If new information exists that is relevant to the share price, it must be made public immediately. In addition, regular Financial reports be published.
- In summary, issuers are subject to stringent requirements to ensure that regulated markets function reliably and efficiently.
- Only issuers that meet the technical, economic and organizational requirements are admitted.
- This is intended to ensure investor protection, security and stability.
Conclusion: Regulated market
Regulated markets are subject to uniform European framework conditions. They are organized by the state and are supervised. In contrast to over-the-counter trading, they are characterized by high requirements. The fundamental aim is to ensure investor protection, transparency and security.
Within the EU, for example, the market structure or transparency requirements are specified. Nevertheless, some factors such as approval processes may vary at national level.
In order to prevent market manipulation or insider trading, for example, regulated markets are monitored accordingly. Depending on the area of responsibility, the State, the Securities and Exchange Commission and the Exchange operator involved in monitoring to ensure that all requirements are met.
The Approval procedure takes place under strict conditions. Approved prospectuses and financial reports must be published periodically. Further obligations apply, such as the ad hoc obligation. In order to obtain approval, the organizational structure and company history are carefully reviewed.