A Multilateral Trading Facility (or MTF) is a specific type of European financial trading system.
MTF operates as an exchange lite, with a key difference between an exchange (such as NYSE, LSE, NASDAQ) being that an MTF cannot trade IPOs.
Key features of the LMAX MTF are:
- LMAX platform is fully developed using Java and uses world's leading ultra-fast messaging technologies;
- Liquidity providers stream prices into the MTF using FIX protocol as limit orders;
- Due do non-matching rules between liquidity providers, traders can benefit from 0-spreads;
- Matching occurs directly at the MTF book, and execution reports then sent out to the trader, clearing broker and the counterparty;
- Due to the fact that matching occurs inside the MTF venue, ultra-fast execution is guaranteed, there's no possibility for requotes and slippages are minimal;
- Many ECNs and other brokers are using LMAX MTF as execution venue for their trades, deepening the liquidity;
- Regulated by FSA.
To address the general confusion between ECN and MTF please see a diagram below: