Organised trading facility (OTF) is a multilateral system, which is not a regulated market or MTF and in which multiple third-party buying and selling interests in bonds, structured finance product, emissions allowances or derivatives are able to interact in the system in a way which results in a contract.
OTF is regulated in the provisions of Title II of the MiFID II Directive, thus operating an OTF is classified as an investment service.
As a consequence, only persons licensed as an investment firm under MiFID are entitled to run an OTF (operation of an OTF is included in the Section A (investment services and activities) of the MiFID II Annex I point 9).
The creation of the OTF category was expected to bring systemic benefits, in particular, aid the price formation process in bonds and derivatives as well as enhance the resilience of the systems being used for the trading of these instruments.
The conception for OTF is broad and includes a multitude of electronic platforms that were not so far subject to requirements applied to regulated markets and MTFs, for this reason, an OTF is often perceived as a catch-all category of a trading venue.
However, it needs to be noted that "recital 8 of MiFIR clarifies that an OTF should not include facilities where there is no genuine interaction of trading interest, such as bulletin boards used for advertising buying and selling interests, other entities aggregating or pooling potential buying or selling interests, electronic post‑trade confirmation services, or portfolio compression. Any system that only receives, pools, aggregates and broadcasts indications of interest, bids and offers or prices shall not be considered a multilateral system for the purpose of MiFID II. This is because there is no reaction of one trading interest to another other within these systems – they do not 'act reciprocally'" (Financial Conduct Authority, Markets in Financial Instruments Directive II Implementation – Consultation Paper I, December 2015, CP15/43, p. 49).