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Financial Dictionary - Continuous market

Continuous market

Essentially, the continuous market is the secondary market in which the securities of Spain's four main stock exchanges are listed. They operate under a single company, namely Bolsas y Mercados Españoles (BME), as a single market at national level, thus unifying the trading of investment products within the country, all of which are listed on the Madrid, Bilbao, Barcelona and Valencia stock exchanges in tandem.

Initially, these four exchanges operated independently. However, the Spanish Securities Market Act in 1988 envisioned a single, unified system and the four exchanges were interconnected a year later. At the outset, there were five companies operating within the market and they were grouped together using the Computer Assisted Trading System (CATS), a software adapted from the Toronto Stock Exchange. In 1995, the Spanish Stock Exchange Interconnection System (known as SIBE) replaced CATS and remains in use to this day. And in 2001, following Spain's entry into the European Union, these four exchanges were definitively unified.

This market brings together more than 130 companies, including IBEX-35 stocks and other smaller companies that are not listed on the IBEX-35. It is supervised by the Spanish National Securities Market Commission (CNMV) governed by BME, which is also indirectly responsible for settlement and clearing.

How the continuous market works

As mentioned earlier, these stock exchanges are secondary markets used to trade shares and any other securities that can be subscribed. As a continuous market, a company can be listed on all four exchanges at the same time. Securities are governed by orders that match bid and ask offers in what is known as the open market. An auction is also held at the beginning and end of the trading session, meaning a trading period in which orders are entered, modified and cancelled, but no purchases are made.

The purpose of this auction is to determine the opening price (if the auction takes place at the beginning of the session) and closing price (if it takes place at the end) and to control any excessive fluctuation. As you might expect, this was originally a non-computerised market in which trading was also continuous (and not based on double daily pricing).

Shares were bought and sold via an open outcry system and trading lasted 10 minutes, whereupon another security would be traded. In 2009, the open-outcry market closed to make way for the continuous and global market.


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