Multilateral Trading Facility - MTF.
What is a 'Multilateral Trading Facility - MTF'
A multilateral trading facility (MTF) is a trading system that facilitates the exchange of financial instruments between multiple parties. Multilateral trading facilities allows eligible contract participants to gather and transfer a variety of securities, especially instruments that may not have an official market. These facilities are often electronic systems controlled by approved market operators or larger investment banks. Traders will usually submit orders electronically, where a matching software engine is used to pair buyers with sellers.
BREAKING DOWN 'Multilateral Trading Facility - MTF'
Multilateral trading facilities offer retail investors and investment firms an alternative venue to trading on formal exchanges. Additionally, MTFs have less restrictions surrounding the admittance of financial instruments for trading, allowing participants to exchange more exotic assets.

Multilateral Trade Agreements: Pros, Cons and Examples.
5 Pros and 4 Cons to the World's Largest Trade Agreements.
Definition: Multilateral trade agreements are commerce treaties between three or more nations. The agreements reduce tariffs and make it easier for businesses to import and export. Since they are among many countries, they are difficult to negotiate.
That same broad scope makes them more robust than other types of trade agreements once all parties sign. Bilateral agreements are easier to negotiate but these are only between two countries.
They don't have as big an impact on economic growth as does a multilateral agreement.
Five Advantages.
Multilateral agreements make all signatories treat each other the same. That means no country can give better trade deals to one country than it does to another. That levels the playing field. It's especially critical for emerging market countries. Many of them are smaller in size, making them less competitive. See more on the benefits of the Most Favored Nation Status.
The second benefit is that it increases trade for every participant. Their companies enjoy low tariffs. That makes their exports cheaper.
The third benefit is it standardizes commerce regulations for all the trade partners. Companies save legal costs since they follow the same rules for each country.
The fourth benefit is that countries can negotiate trade deals with more than one country at a time. Trade agreements undergo a detailed approval process.
Most countries would prefer to get one agreement ratified covering many countries at once.
The fifth benefit applies to emerging markets. Bilateral trade agreements tend to favor the country with the best economy. That puts the weaker nation at a disadvantage. But making emerging markets stronger helps the developed economy over time.
As those emerging markets become developed, their middle class population increases. That creates new affluent customers for everyone.
Four Disadvantages.
The biggest disadvantage of multilateral agreements is that they are complex. That makes them difficult and time-consuming to negotiate. Sometimes the length of negotiation means it won't take place at all.
Second, the details of the negotiations are particular to trade and business practices. That means the public often misunderstands them. As a result, they receive lots of press, controversy and protests.
The third disadvantage is common to any trade agreement. Some companies and regions of the country suffer when trade borders disappear. Smaller businesses can't compete with giant multi-nationals. They often lay off workers to cut costs. Others move their factories to countries with a lower standard of living. If a region depended on that industry, it would experience high unemployment rates. That makes multilateral agreements unpopular.
Some regional trade agreements are multilateral. The largest is the North American Free Trade Agreement which was ratified on January 1, 1994. NAFTA is between the United States, Canada and Mexico.
It increased trade 300 percent between its beginning and 2009. Find out What Happens If Trump Dumps NAFTA?
The Central American-Dominican Republic Free Trade Agreement was signed on August 5, 2004. CAFTA eliminated tariffs on more than 80 percent of U. S. exports to six countries. These include Costa Rica, Dominican Republic, Guatemala, Honduras, Nicaragua and El Salvador. By 2013, it increased trade by 71 percent or $60 billion.
The Trans-Pacific Partnership would have been bigger than NAFTA. Negotiations concluded on October 4, 2015. After becoming president, Donald Trump withdrew from the agreement. He promised to replace it with bilateral agreements. The TPP was between the United States and 11 other countries bordering the Pacific Ocean. It would have removed tariffs and standardized business practices.
Ready to start building wealth? Sign up today to learn how to save for an early retirement, tackle your debt, and grow your net worth.
All global trade agreements are multilateral. The most successful one is the General Agreement on Trade and Tariffs. One hundred fifty-three countries signed GATT in 1947. Its goal was to reduce tariffs and other trade barriers.
In September 1986, the Uruguay Round began in Punta del Este, Uruguay. It centered on extending trade agreements to several new areas. These included services and intellectual property. It also improved trade in agriculture and textiles. On 15 April 1994, the 123 participating governments signed the agreement in Marrakesh, Morocco. That created the World Trade Organization. It assumed management of future global multilateral negotiations.
The WTO's first project was the Doha round of trade agreements in 2001. That was a multilateral trade agreement between all 149 WTO members. Developing countries would allow imports of financial services, particularly banking. In so doing, they would have to modernize their markets. In return, the developed countries would reduce farm subsidies. That would boost the growth of developing countries that were good at producing food. But farm lobbies in the United States and the European Union stopped it. They refused to agree to lower subsidies or increased foreign competition. The WTO abandoned the Doha round in June 2006.
On December 7, 2013, WTO representatives agreed to the so-called Bali package. All countries agreed to streamline customs standards and reduce red tape to expedite trade flows. Food security is an issue.
India wants to subsidize food so it could stockpile it to distribute in case of famine. Other countries worry that India may dump the cheap food in the global market to gain market share.

Multilateral trading system meaning. The system which allows large numbers of countries to agree to trade with each other. The World Trade Organisation (WTO) is part of this system.
What Is A Multilateral Trade System?
Multilateral trading system meaning. Legal definition of the 'multilateral system' is laid down by Article 4(19) of the MiFID II Directive. Pursuant to this provision 'multilateral system' means any system or facility operated and/or managed by an investment firm or a market operator in which multiple third-party buying and selling trading interests in.
Events surrounding the WTO Ministerial meeting in Seattle in late became a kind of Rorschach test for how different constituencies view globalization -- how different people and groups look at the same pictures but draw different meanings from them. Many developing country governments noted the asymmetry in the multilateral trading regime, which they viewed as dominated by a narrow agenda of a few industrialized countries, thereby marginalizing the genuine development concerns of the vast majority of the people.
The breakdown in Seattle opened up the opportunity for a much-needed breathing space to discuss and debate the significance of trade for achieving the Millennium Development Goals MDGs.
The controversy surrounding the global trading system is not about whether trade is necessary, but about how the multilateral trade regime can operate in ways that support and foster human development. To strengthen the participation and substantive negotiating and advocacy positions of developing countries in the debate and negotiations on the emerging global trading regime;.
To present a UNDP position on the human development outcomes of the current global trading regime and the reforms needed to make it more inclusive and balanced, thereby enabling trade to become an instrument for enhancing human development and reducing poverty. Indeed, an important part of the commitment of the project was to publish, in their independent right, each of the papers.
We believe that they deserve to be widely read and used to inform the current debate on trade and development. This paper, written by Third World Network, Malaysia, under the leadership of its Director, Martin Khor, analyses the global governance of trade from a development and developing country perspective with a particular emphasis on its institutional framework. The paper begins by looking at the role of trade and the world trading system in the context of development.
It provides a useful analysis of the historical evolution of the world trading system in the post World War II period within which it contextualizes and analyses the current multilateral trade regime embodied in the World Trade Organization WTO , using several WTO Agreements as illustrations.
It then looks at the impact and implications of some of these agreements on development and developing countries, offering proposals for both improving the multilateral trading regime as well as for institutional and structural reform of the world trading system. We hope the reader will find the paper informative and useful as a contribution to the ongoing debate on trade and development. This report examines the present system and its implications and offers som e suggestions for improving it.
For developing countries, external trade should be viewed as a crucial element of an overall development strategy towards sustainable growth and development. It should contribute to the generation of full employment, fulfillment of needs in areas of food, health, education, and all of this in the context of environmental sustainability. At the international level, it should cater to the needs of the least developed and developing countries, with guidelines and practical measures that improve their terms of trade, enhance their export capacity and sustain their balance of payments.
Most importantly, trade policy should be seen as contingent on the specific conditions of each country depending on its level of development. A one-size-fits-all approach would not only not work but also, if enforced, potentially do more harm than good.
There are two main aspects to trade: Currently, developing countries face pressure on two fronts: Pressures for import liberalization derive from mainstream trade theory, which holds that it will lead to lower prices and increased efficiency in the domestic economy, thereby benefiting both consumers and producers. However, empirical evidence shows no straightforward correlation between trade liberalization and overall economic performance as measured by GDP growth.
Moreover, in order to benefit from import liberalization, several other factors need to be addressed, including competitiveness levels, macro-economic stability, market access for exports, governance and human, institutional and productive capacity. If imports are liberalized too rapidly when the conditions for its success are not present, there can be serious negative effects such as the de-industrialization, closure of local firms and job losses suffered by many countries.
Uncertain export earnings are a consequence of a lack of physical and technological infrastructure needed to make developing country exports competitive, as well as unstable and declining terms of trade. Developing country exports are concentrated in primary products, for which there has been a secular decline in world prices, leading to worsening terms of trade. Thus an increase in export earnings depends on a re-orientation of the export sector towards value-added manufactures and services, and simultaneously, greater competitiveness in those sectors.
These objectives are further hampered by the presence of tariff and non-tariff barriers to markets in developed countries, especially in the sectors in which developing countries have a comparative advantage. Currently, developing countries are being asked to increase imports, despite being unable to expand exports, and many have found their trade deficits widening significantly. An examination of the evolution of the trading system shows that industrialization and rapid economic growth occurred in developed countries usually under conditions of protection of their domestic markets -- though this does not imply that protection necessarily leads to industrialization or growth.
The history of GATT and its successor, the WTO, is also replete with examples of how the major trading countries have been reluctant to agree to certain measures that would enable developing countries to benefit from the trading regime and how the rules of the system have been repeatedly bent to accommodate the protectionist interests of these major players.
For several decades, the agriculture and textiles sectors remained outside the normal GATT disciplines on the insistence of the developed countries, and even after the Uruguay Round which was supposed to herald the liberalization of trade in these sectors their markets remain highly protected. Thus, developing countries have not been able to obtain their fair share of benefits from the trade system.
The objectives of the global trading system, as embodied in the GATT preamble, include: The safeguards mechanism and the balance of payments provision allow members to restrict imports and thereby share their burden of relief with other countries. The system is also supposed to provide protection from unilateral trade-restrictive action. The dispute settlement mechanism is also fairly efficient in some ways.
However, most developing countries have not been able to take advantage of it, and some have also been frustrated at certain panel and Appellate Body decisions. The enforcement mechanism is based on retaliatory action, which is far more powerful in the hands of rich countries than of poor countries. The system is also based on the principles of reciprocity and mutual advantage, which are in some important ways inappropriate for a system made up of countries with such diverse and unequal capacities.
Developing countries face several types of problems in the WTO system. First, some of the structural features of the system and many of the existing agreements are imbalanced against their interests. Second, the anticipated benefits to developing countries have not materialized, a major reason being that the developed countries have failed to fulfill their commitments e.
Third, developing countries face mounting problems in attempting to implement their obligations under the rules. Fifth, the decision-making process is less than transparent or fair and makes it difficult for developing countries to adequately participate or to have their views reflected in the decisions of the organization, especially at Ministerial Conferences. Addressing these problems requires a system that effectively takes into account the different capacities of different categories of members at different stages of development, so that the outcome will be an equitable sharing of benefits.
Given the inadequacy of the structure based on reciprocity, there should be some structural improvement to redress the problem of overall imbalance, and structural changes to compensate for the handicaps of developing countries in the WTO system. It should be formally accepted that developing countries undertake less and lower levels of obligations than developed countries.
Thus, differential and more favourable treatment to developing countries should apply to levels of obligation and not be limited to longer implementation periods, as is usually the case at present. Developing countries should not be obliged to give up or refrain from policies or measures supporting technological development and diversification of production and exports. Developed countries should make concrete arrangements to encourage imports from developing countries.
It should be recognized that developing countries need to fine-tune their trade policy instruments to support the growth of specific sectors as a dynamic process, and thus require flexibility in raising and reducing tariffs.
The current procedure for raising tariffs beyond the bound level is very cumbersome and should be made smoother and easier. For infant industry purposes, countries should be allowed to raise tariffs for a limited period to promote the establishment of an industry. These sectors are both important to exporters in developing countries and subject to import restrictions or barriers by developed countries.
In the case of textiles, although under the Uruguay Round developed countries agreed to progressively phase out their quotas over ten years to January , they have retained most of their quotas even after seven years of implementation. This has raised doubts as to whether developed counties will adhere to the deadline. They should give assurances in both deed and word that they intend to honour their commitments at the scheduled time, for example, by accelerating genuine liberalization.
The International Textiles and Clothing Bureau ITCB has proposed that at least 50 percent of the imports of products that were under specific quota limits should be liberalized by 1 January In the case of agriculture, the WTO Agreement on Agriculture AoA set disciplines for market access, domestic support and export subsidies, and developed countries were expected to reduce protection. In reality, developed countries have been able to maintain high levels of protection. Many set very high tariffs in several products; thus, even after the required 36 percent reductions, they remain prohibitively high.
Domestic support has also remained very high; in fact, the total amount of domestic subsidies in OECD countries has actually risen as there was an increase in permitted types of subsidies that more than offset the decrease in subsidies that come under discipline.
The export subsidies budget in developed countries is also to be reduced by only 36 per cent. Meanwhile, developing countries are facing serious implementation problems. They have had to remove non-tariff controls and convert these to tariffs.
Many have lower agriculture tariffs some owing to reductions under structural adjustment and except for LDCs are expected to reduce bound rates progressively.
Developing countries also have had low domestic subsidies due to financial constraints , which they are not allowed to raise beyond a de minimis level and except for LDCs must reduce them if they are above this level. Increased competition from imports has threatened the small farm sector in many developing countries and increased fears of food insecurity.
An FAO study in 14 developing countries concluded that liberalization in the agriculture sector has led, variously, to an increase in the food import bill, a decline of local production in products facing competition from cheaper imports, and a general trend towards consolidation of farms and displacement of farm labour.
Instead, food aid to these countries fell significantly and their ability to finance their increasing food bills deteriorated. To rectify this situation, domestic and export subsidies and tariff peaks in agriculture in developed countries should be drastically reduced.
Meanwhile, d eveloping countries must be allowed greater flexibility on the grounds of food security, protection of rural livelihoods and poverty alleviation.
Food production for domestic consumption in developing countries as well as the products of their small and non-commercial farmers should be exempt from the AoA disciplines of import liberalization and domestic subsidy.
Also, these countries should be able to use the special safeguard mechanism, whether or not they have taken to tariffication. There should be an agreement to effectively assist net food importing countries. There is an imbalance in the treatment of subsidies. Subsidies mostly used by developed countries e. Subsidies such as the latter need to be recognized as an instrument of development rather than one of trade distortion, and should be exempt from countervailing duty and other forms of counter-action.
International standards are used in determining permitted measures that countries can take under the agreements on technical barriers to trade and on sanitary and phytosanitary measures. Thus, standards are set without adequately paying attention to the situation of developing countries and this may affect their market access. Developing countries should be assisted to participate fully in the formulation of standards.
There should also be a rule that new standards can be set only if a minimum number of developing countries have been able to participate in the process. However, the method of operation and some new decisions have made this provision less effective, and an important instrument for reducing the imbalance in the system has been made almost non-operational. The IMF includes volatile and uncertain short-term flows e. The current criterion of deciding on whether a BOP problem exists thus appears faulty.
Further, a recent decision in a dispute requires the developing country concerned to give priority to tariff-type action over direct import control measures. This has reduced the capacity of developing countries to deal with the problem quickly and effectively. Also, the determination of the existence of a BOP problem should be made by the General Council, based on the recommendation of the balance of payments committee, using the IMF reports as inputs only.
Current rules designed to deal with temporary BOP problems should be supplemented with new rules to provide relief for structural BOP problems. Since services enterprises in developed countries have far greater capacity than those in developing countries, the liberalization of services under the General Agreement on Trade in Services GATS has mainly benefited the former.
Enterprises in developing countries generally lack the supply capacity to benefit from liberalization in developed country markets. In an area where developing countries do have an advantage, such as the movement of labour, developed countries have not been prepared to undertake liberalization. Although developing countries are allowed under GATS to liberalize fewer sectors and transactions, it is not specified how this is to be operationalized. Negotiations on financial services showed that developed countries insisted on higher levels of commitments from developing counties.
There is a lack of adequate data on the services trade, making it difficult to assess the effects in terms of gains and losses to a country and to developing countries as a whole of GATS and services liberalization.
Other problems for developing countries include supply constraints and barriers to services exports to developed markets, and challenges faced from attempts by developed countries to alter the basic architecture of GATS. There have also been concerns that GATS would affect the provision of and access to social services to the public.

Multilateral trading system meaning

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you agree to receive all cookies on this website. Learn more and refer to our privacy policy. Read more.
Legal definition of the 'multilateral system' is laid down by Article 4(19) of the MiFID II Directive. Pursuant to this provision 'm ultilateral system' means any system or facility operated and/or managed by an investment firm or a market operator in which multiple third-party buying and selling trading interests in financial instruments are able to interact in the system.
MiFID I does not use this definition.
The characteristic feature of the MiFID II is the requirement that all multilateral systems for the trading of financial instruments are a regulated market, MTF or OTF operated by an authorised firm or a regulated market.
Multilateral versus bilateral systems.
It is sometimes underlined, MiFID II has introduced this term in the opposition to 'bilateral systems'.
UK Financial Conduct Authority (FCA) in the Consultation Paper I on the MiFID II implementation (CP15/43) of December 2015 observes: "Multilateral systems may be contrasted with 'bilateral systems' where an investment firm enters into every trade on own account. [. ] Any system or platform is a multilateral system where more than one market participant has the ability to interact with more than one other market participant on that system or platform" (p. 264).
'multilateral system' means any system or facility in which multiple third-party buying and selling trading interests in financial instruments are able to interact in the system.
Article 1(7) of MiFID II requires all multilateral systems in financial instruments to operate as:
It means, the definition of the 'multilateral system' under MiFID II is common to any trading venue, a new type - OTF - including.
MiFID I provides for two types of trading venues only, regulated markets and MTFs, definitions thereof being very similar as sharing a number of features (in essence, both regulated markets and MTFs are systems which operate in accordance with non‑discretionary rules that bring together multiple buying and selling interests in a way that results in contracts).
All multilateral systems in financial instruments shall operate either in accordance with the provisions of Title II concerning MTFs or OTFs or the provisions of Title III concerning regulated markets.
Constituent elements of the definition of 'multilateral systems' - the requirement for trading interests to interact in the system.
FCA in the above Consultation Paper of December 2015 ( p. 48, 49) also argues, the MiFID II definition of the 'multilateral system' does not require the conclusion of contracts under the system's rules but only that trading interest is able to interact in the system.
FCA interprets the effect of combined Articles 4(19) and 1(7) that the MiFID requirement that a contract is executed under the system's rules by means of the system's protocols is now a sufficient but not necessary condition to be a multilateral system and hence to be regulated as a trading venue.
Instead it is required that trading interest is able to interact in the system.
FCA is of the opinion that the condition for trading interests to interact in the system is less stringent than that a contract is executed under the system's rules, or by means of the system's protocols or internal operating procedures.
FCA is, furthermore, of the view that interaction in a system or facility occurs when the system or facility allows multiple trading interests to exchange information relevant to any of the essential terms of a transaction in financial instruments (being the price, quantity and subject‑matter) with a view to dealing in such instruments.
The information exchanged need not be complete contractual offers, but may be simply invitations to trade or 'indications of interest'.
In conclusion, pursuant to FCA, at a minimum, a platform will be considered a multilateral system (and hence must operate as a regulated market, MTF, or OTF in accordance with article 1(7) of MiFID II) if the system provides the ability for trading interests to interact with a view to dealing and:
- allows multiple participants to see such information about trading interest in financial instruments, or submit such information about trading interest in financial instruments for matching, and.
- enables them, through technical systems or other facilities, to take steps to initiate a transaction, or be informed of a match.
MiFID II wording as well as the above FCA's analysis of the core, decisive elements of the very definition of the multilateral system indicates it is somewhat subtle concept, for example:
- a system that provides participants confirmation or notification messages about a matching opportunity between those participants, with a view to a transaction in financial instruments, qualifies as such a system or facility,
- on the other hand any system that only receives, pools, aggregates and broadcasts indications of interest, bids and offers or prices is not considered a multilateral system for the purpose of MiFID II (this is because there is no reaction of one trading interest to another other within these systems – they do not 'act reciprocally' (see also recital 8 of MiFIR)).
In the FCA's view, interaction in a system or facility occurs when the system or facility allows trading interests to exchange information relevant to any of the essential terms of a transaction in financial instruments (being price, quantity, subject-matter).
The information exchanged need not be complete contractual offers, but may be simply invitations to treat or 'indications of interest'.
The FCA concludes that the definition of a multilateral system "goes beyond" the definitions of an OTF and MTF and of the systems operated by regulated markets.
Treatment for the portfolio compression and post-trade confirmation services.
Pursuant to the aforementioned FCA's analysis, neither the service of portfolio compression, which reduces non-market risks in derivative portfolios without changing the market risk, nor post-trade confirmation services, constitutes a multilateral system by itself.
However, if a firm operates a system that comes within the definition of a multilateral system without taking into account these activities, any portfolio compression or post-trade confirmation services that it provides for that system can form part of the multilateral system that the firm is operating.
System providing quote streaming and order execution services for multiple systematic internalisers (SIs)
System that provides quote streaming and order execution services for multiple SIs is a multilateral system and is required to seek authorisation as a regulated market, MTF or OTF in accordance with Article 1(7) of MiFID II.
Such an opinion has been expressed by ESMA on 7 July 2017 in Questions and Answers on MiFID II and MiFIR market structures topics, ESMA70-872942901-38.
Questions and Answers on MiFID II and MiFIR market structures topics, ESMA70-872942901-38.
Question 19 [Last update: 07/07/2017]
Should a system providing quote streaming and order execution services to multiple SIs be authorised as a multilateral system?
Articles 14(1) and 18(1) of MIFIR require SIs to make public firm quotes, which may be published through an APA. Some prospective APAs propose setting up arrangements which, on top of their APA services, provide a suite of quote streaming and order execution services to SIs and their clients. Clients cannot interact with more than one SI via a single message but can send multiple messages to multiple SIs participating in the service provided.
Article 4(19) of MiFID II defines a multilateral system as” [. ] any system or facility in which multiple third-party buying and selling trading interests in financial instruments are able to interact in the system”. Article 1(7) of MiFID II requires all multilateral systems to operate as either a RM, an MTF or an OTF.
In line with the criteria set out in Q&A 3 on OTFs published on 3 April 2017 for identifying multilateral trading systems, ESMA notes that:
a) If a system allows multiple SIs to send quotes to multiple clients and allows clients to request execution against multiple SIs, then this meets the interaction test foreseen in Article 4(1)(19) even if there is no aggregation across individual SI quote streams;
b) The arrangements described above have the characteristics of a system as they are embedded in an automated facility; and,
c) Those arrangements are not limited to pooling potential buying and selling interests from SIs but also cater for the direct execution of the selected SI quotes. Genuine trade execution would be taking place on the system provided.
Accordingly, a system that provides quote streaming and order execution services for multiple SIs should be considered a multilateral system and would be required to seek authorisation as a regulated market, MTF or OTF in accordance with Article 1(7) of MiFID II.
ESMA reminds that if a firm were to arrange transactions on one system and provide for the execution of the transactions on another system, the disconnection between arranging and executing would not waive the obligation for the firm operating those systems to seek authorisation as a trading venue.