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Baskets of Shares
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The Barcelona Stock Exchange has an innovative system that permits its members to trade in baskets of securities. The advantages of this form of trading and the different baskets that can be traded are explained below.

Under certain circumstances, investors may be interested in the automatic and simultaneous trading of groups of securities. There are various reasons that may drive this:

  • Greater diversification of the investment
  • Arbitrage trading in the derivatives market
  • Index trading strategy

To facilitate trading in baskets of securities, the Barcelona Stock Exchange has developed a new program within its Order Routing System ("Sistema de Gestión de Ordenes" or SGO), which is connected in real-time with the permanent market, and permits the automatic placing of orders for baskets of securities in this market, where trading in the individual securities is also carried out.

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BCN TOP-EURO, BCN TOP-5 AND BCN-SECTORIAL BASKETS

In order to facilitate the diversification or index trading of portfolios, the Barcelona Stock Exchange has created baskets of securities that are balanced, for smaller investment volumes - for quantities of approximately 6,000 euros (one million pesetas) or multiples of this amount -, thus achieving maximal diversification at an optimal level of transaction costs.

To allow the investments in these baskets to be monitored, indexes, created by the Barcelona Stock Exchange, are available and are published in the Quotation Bulletin and by quotation services such as Databolsa, Reuters, Bloomberg, etc.

The baskets are the following:

  • BCN TOP-EURO: Includes Spanish securities that form part of the "FTSE EUROFIRST 300" and "DJ. EUROSTOXX 50".
  • BCN TOP-5: This is composed of the 5 most liquid and representative securities of the Spanish stock market.

Baskets of the most significant sectors of the Spanish stock market, identified by the following indexes:

  • BCN-5 Feeding and Tobacco
  • BCN-5 Banks
  • BCN-5 Comerce, Leisure and Tourism
  • BCN-5 Construction
  • BCN-5 Energy
  • BCN-5 Property
  • BCN-5 Media and Publicity
  • BCN-5 Metallic
  • BCN-5 Services
  • BCN-5 Technology
  • BCN-5 Textiles

The composition of the BCN TOP-EURO, BCN Top-5 indexes and the five indexes representing the sectorial baskets are revised half-yearly, in the same way as the benchmark indexes of the Íbex-35, BCN Global-100 and BCN Mid-50, unless exceptional circumstances arise which advise an early revision.

The base of the indexes of the aforementioned baskets is reset every year to 1,000 on 1 January.

 

TRADING IN BASKETS BASED ON THE IBEX-35

It is possible to trade in baskets that exactly replicate the composition of the Íbex-35 index, whose composition can be consulted at all times. The maintenance of this program, including the necessary revisions to reflect changes in the composition of the index, whether they affect the number of shares issued or the companies that comprise it, is carried out centrally from the Barcelona Stock Exchange. To facilitate arbitrage trading against the derivatives market, this program enables the introduction of orders according to the number of equivalent futures contracts.

 

OTHER BASKETS OF SECURITIES

The program for baskets of securities trading also allows other baskets with distinct components to be generated by the brokers on their own account or at the request of the investors.

 

USE OF THE SYSTEM

The system for trading in baskets of securities incorporates various possibilities for determining the entry price to the market of the orders relating to the securities that comprise the pool. Details of these existing possibilities are provided below:

  • Free choice of the limit of each order.
  • Setting the limit of each order in function of:
    • the last price
    • the best contrary position
    • the best position of the same sign

Additionally, margins can be applied, in percentages, to the limits indicated above, with the objective of establishing the order price at distinct prices or to increase the probability of an execution. For all the order prices that are introduced, the system calculates an overall valuation of the basket and the equivalent value in index points.

In order to minimize the risks from the introduction of orders in the market - non-execution of orders or partial execution -, the system permits prioritization in the placing of orders; failing that, the sequence is determined in declining order of the weighing of each security in the basket.

In addition, it is possible to bring on to the market orders for baskets of securities through various dealers. In this way, a basket may be introduced onto the market from various brokers' terminals simultaneously, thus further reducing the execution time.

This program is fully integrated with the back-office services provided by the Barcelona Stock Exchange, allowing the automatic application of the brokerage established for each client or the application of specific commission rates for trading in baskets of securities.

 

 

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