A characteristic difference between an OTF and a MTF or a regulated market is that the latter brings together buying and selling interests in accordance with non-discretionary rules. The operator of an OTF does have a degree of discretion in deciding whether to place or withdraw an order on its OTF and in deciding not to match a client order with other orders available in the systems of the OTF.
The investment company that operates an OTF must, among other things, also comply with the best execution obligations in article 4:90a and 4:90b of the Financial Supervision Act (Wft). The best execution obligation does not apply for an MTF or a regulated market vis-à-vis its members.
In addition, an OTF can only carry out transactions in bonds, structured financing products, emission rights and specific derivative financial instruments. In contrast, MTFs and regulated markets may also carry out transactions in shares and other equity instruments.
A fourth distinction is that an OTF has to take measures to prevent it from acting on its own account. However, it is permitted to trade on its own account in illiquid government bonds. For the other instruments that may be traded via an OTF, the OTF may only trade on its own account insofar as matched principal trading is concerned.
Matched principal trading means that the OTF interposes itself between the buyer and the seller to the transaction in such a way that it is never exposed to market risks throughout the execution of the transaction. Both sides of the transaction are executed simultaneously and the transaction is concluded at a price that does not result in a profit or loss for the facilitator, other than a previously disclosed commission, fee or charge for the transaction. An OTF may use matched principal trading only if the client has consented to this.