On July 25, 2022, the Financial Market Commission issued General Rule No. 480 (the “NCG 480”), which regulates the interconnection of stock exchanges.
Pursuant to NCG 480, and in accordance with the provisions of Article 44 bis of Law 18.045 of the Securities Market Law, the stock exchanges must implement a real-time interconnection mechanism between the automatic matching modalities of the systems called “Telepregón” of the Santiago Stock Exchange and “Pregón” of the Chilean Electronic Stock Exchange (Bolsa Electrónica de Chile).
The purpose of this is that the best bid in force in any of the automatic matching systems of these exchanges is matched before the other bids in force in these systems. In the event of equal prices, the bid that was previously entered in any of these systems shall always be matched.
Notwithstanding the foregoing, the following shall not be included within the interconnection obligation: (i) simultaneous operations; (ii) forward operations; and (iii) orders whose individual amount exceeds 30,000 UF, in which the best execution is only achieved by executing the operation outside the inter-exchange system.
In effect, only those orders of more than 30,000 UF in which the client himself directly enters his order in the system of the corresponding stock exchange, opting not to submit to the interconnected system and those orders in which the client, for the execution of his order of more than 30,000 UF, instructs the broker not to submit to the interconnected system, as well as the broker’s own portfolio order whose purpose is to acquire or dispose of the instruments of said client, will be included in the assumption of paragraph (iii) above.
Except for the exceptions indicated above, brokers must warn their clients of the impossibility for an offer to be executed only in a certain stock exchange center, given the binding nature of the interconnection.
In addition, NCG 480 establishes the conditions to be met by the interconnection mechanism and the technical, communication and security requirements to be met by the mechanism, the exchanges and their participants.
Among these conditions, it is important to highlight that no stock exchange, unilaterally or by mutual agreement, may establish any requirement or condition to the brokers of other exchanges for their offers to be communicated and marked through the interconnection system. Neither may the exchange where the inter-exchange order was matched make any charge to the broker of another exchange for such matching. In turn, the exchanges may not charge their brokers for the fact of contracting the terminals of another exchange and entering their orders through them. This is without prejudice to the charges that the stock exchange may make to its brokers for the entry of bids directly through its own terminals and for the complementary services provided by the stock exchange by virtue of contracts entered into between the parties.
The instructions set forth in NCG 480 are effective as of July 25, 2022, the date of issuance of the regulation. Notwithstanding the foregoing, the stock exchanges, within 2 months from that date, shall agree on the common standard for real-time messaging between stock exchanges. In addition, they will have a period of 4 months as of such date to adapt their regulations and submit them to the Commission for approval. For the purposes of the design, development and implementation of the interconnection mechanism, they will have 9 months from that date. Notwithstanding the foregoing, as from the sixth month of said term, the system tests shall be carried out, so that its implementation is carried out within a maximum term of 12 months as from the date of issuance of the regulation.