Spanish Securities Market Regulation and Structure
The National Securities Market Commission (CNMV)
The National Securities Market Commission (CNMV) is an institution under the Ministry of Economy and Competitiveness of Spain. The basic function of the CNMV is to monitor the functioning of securities markets in Spain, which include:
- Ensuring the transparency of the Spanish market.
- Ensuring the correct formation of prices of the financial instruments.
- Protecting investors.
Prudential Supervision by the CNMV
The CNMV exercises prudential supervision over the following entities to ensure transaction security and the solvency of the system:
- Collective Investment Schemes (instituciones de inversión colectiva), a category which includes: investment companies (securities and real estate), investment funds (securities and real estate) and their management companies.
- Broker-Dealers and Dealers, which are entities engaged primarily in the purchases and sales of securities.
- Portfolio Management Companies, i.e., entities focusing primarily on managing individuals’ assets (principally securities).
Financial Markets: Primary vs. Secondary
Primary Market Function
The primary market is one in which the placement of the primary assets of the issuer to the investor takes place in exchange for the funds with which funding is obtained. Therefore, a financial asset is subject to single trading on the primary market.
Secondary Market Role
In contrast, in the secondary markets the purchasers of the securities buy them from their owners and not from the issuer (i.e., from brokers and intermediary agents). In this market, there is no new funding and no transfer of resources into productive investment.
The secondary market performs several functions to support the primary market:
- When a company decides to issue new financial assets, it attends the secondary market to determine the price investors are willing to pay to purchase the securities, in order to know the appropriate issue price and ensure their placement among them.
- Therefore, this serves to establish a “reference price”.
- It also provides liquidity to investors owning the assets, which indirectly also provides liquidity to the primary market through the divestment opportunity (i.e., sale of assets) offered.
Spanish Stock Market Structure
Stock Exchanges and BME
In Spain, there are four stock markets located in Madrid, Barcelona, Bilbao, and Valencia. The most important of the four is the Madrid Stock Exchange. A continuous market also exists, which is an electronic system.
Nevertheless, in Spain, stock markets are integrated into the institution called BME (Bolsas y Mercados Españoles), meaning “Spanish Stock Markets and Markets”. BME is the company that integrates all securities markets in Spain. Bolsas y Mercados Españoles (BME) manages the main official secondary markets (regulated markets) in Spain, and other multilateral electronic trading systems.
Components of BME
BME is made up of, among others:
- The Madrid, Barcelona, Bilbao, and Valencia stock exchanges.
- The Options and Futures market MEFF.
- The Fixed Income Market AIAF.
- The business unit responsible for the registration, clearing, and settlement of equity and fixed income securities.
Specific Market Entities
There are several specific entities:
- Madrid Stock Exchange
- Barcelona Stock Exchange
- Bilbao Stock Exchange
- Valencia Stock Exchange
- Sociedad de Bolsas (Stock Markets Society). SIBE is the technical trading platform of the Spanish stock exchange market. Sociedad de Bolsas is the original source of the information generated from SIBE and is in charge of its organization and management.
- MEFF AIAF SENAF Holding de Mercados Financieros, S.A.