Markets, Trading Venues and Order Handling
MiFID II defines trading venues: regulated markets (RM), multilateral trading facilities (MTF) and organised trading facilities (OTF), plus systematic internalisers (SI) as investment firms trading on own account. In Bulgaria, the BSE operates regulated markets; MTFs may be operated by investment firms or the exchange. Candidates must understand best execution, order handling rules, and the concepts of pre-trade and post-trade transparency. Order types matter: market, limit, stop and stop-limit orders; time-in-force variants such as day, GTC and IOC. Know the difference between quote-driven and order-driven markets, and between lit and dark trading.
Traps include assuming an OTF may trade equities (it may not, save for limited cases) or that an SI is a venue rather than a firm. Best execution is about the client's overall result, not simply the lowest price, and must consider price, cost, speed, likelihood of execution and settlement. Another trap: confusing the BSE's official market segments with an MTF. Order priority rules (price then time) are commonly tested.
Rule of thumb: venue is where trading happens; SI is a firm; OTF excludes equities.
Worked example: a client places a limit buy at 10.00 while the market is 9.90. The order rests until the price reaches 10.00; execution is not guaranteed, and the firm must still handle the order promptly and fairly, recording receipt time.