(See also Online trading definition)


Online trading is a digitized trading of financial instruments (stocks, bonds, futures, etc ...) carried out by investors through internet. Online trading is a service of financial companies, authorized by the Commissione Nazionale per le Società e la Borsa (Consob), known as online brokers or digital intermediaries (eg. Banks). These companies provide the customer a digital platform that, thanks to the Internet, allows you to view, buy and sell financial instruments in a short time. The feature of this service is in the remote operation, allowing the investor to give orders to the intermediary through a connection with the web site.

Featuresand Regulation

The online trading has developed in the Italian market in the nineties and has mainly success to the speed of orders transmission, to the almost total elimination of the error risk in their transposition and especially to the containment of trading commissions. In 1995 born the first trading platforms in Italy, following the rapid expansion of the phenomenon, thanks to the gradual spread of the Internet, the Consob in 1998 establish it and regulate it with Consob Regulation no. 11971 for enforcement of Legislative Decree 24 February 1998 n. 58. The spread of the Internet also promoted the role of alternative trading platforms, like Alternative Trading Systems (ATS) or Electronic Communication Networks (ECN), used by institutional and professional investors and generally can not be used by individual investors. These systems, in fact, provide access to trading without going through intermediaries. Among the applicable legislation, the Legislative Decree 24 February 1998 n.58 takes the value of the primary source of law while secondary are: the enforcement Regulations of T.U. concerning the regulation of intermediaries adopted by Consob with resolution no. 11522 of July 1, 1998, then amended by resolution no. 11745 of 9 December 1998, and also the enforcement Regulations of T.U adopted by Consob with resolution no. 11971 of 14 May 1999. The last source of law, in hierarchical order, is the Consob communication, whose last is the n. DI / 30396 of 21 April 2000, which summarizes the rules applicable to online trading.

Within the overall framework of the regulation applicable to online trading, we can identify some key areas that regulate the start-up phase of the relationship with the investor:

Qualified entities to trading: authorized intermediaries to negotiation of trade online are listed by 'art.30 paragraphs 3, 4, 5 of T.U.:

- authorized entities to the placement of financial instruments, with or without prior subscription or purchase to be detained, or assumption of guarantees to issuers;

- investment Management Company (IMCO)and SICAVs, exclusively for units and shares in investment funds;

- investment firms, banks, financial intermediaries ex art.107 T.U., IMCO, however, relatively to its investment services.

Contract agreement: under the laws in force, the contract agreement for investment services should be, as a rule, in writing. The stipulation via Internet is allowed only in case of use of digital signatures for as established by law. Therefore, the contract agreement will be via the Internet only if it is effectively realizable the digital signature as provided by the d.p.r. 10 november 1997, n. 513, for the enforcement of art. 15, comma 2, law 15 march 1997, n. 59. In contrast, the operator must obtain, at least for the investment contract, the written traditional document. The same applies to any other statement negotiating. Particularly important have the recent Directive 2002/65 / EC applies to all online trading transactions, even when the contract reach a conclusion on line, while in Italy under national regulations on financial matters, it must be in writing as a condition of validity.

Customer identification for the purpose of anti-money laundering measures: at the start of the account, the intermediary must identify the customer as required by law no. 197/1991 and by the related regulations. For this reason, the service provider often use, as permitted by law, the faculty of indirect identification thanks to the obtaining appropriate certification by other intermediary, usually a bank, to heed the funds transfer.

Information for customers: the ways of online provision of the service does not relieve intermediaries from the rules in force concerning the prior information to the investor. It is compatible with the rules in place, the option to make available through the website the document on the general risks of investing in financial instruments, which should be delivered to the investor before provision of investment services and accessories these connected. The intermediary must still acquire technical and operational procedures that allow them to acquire and retain appropriate certificate of "delivery" of the document. Furthermore, intermediaries must operate in such a way that customers "are kept adequately informed" (Art. 21, paragraph 1, lett. B) of the Decree. N. 58/1998), and behave with "fairness and transparency, in the interests of customers" (art. 21, paragraph 1, lett. A) of the Decree. N. 58/1998).

Information to be acquired by customers: intermediaries are required to fulfill the obligation to "acquire the necessary information from customers" (art. 21, paragraph 1, lett. B) of the Decree. N. 58/1998) and, in particular, before the start of the service, "the investor should ask for information about their experience in investments of financial instruments, its financial situation, its investment objectives, as well as to the his risk propensity "(Art. 28, paragraph 1, lett. a) of Regulation No. 11522/1998). The current rules do not means the specific procedures and methods of acquiring information on the investor; the definition of such procedures and methods is based on the operators discretion.

With regard to the phase of execution online investment services for third parties and for transmit orders:

System efficiency: intermediaries who provide online trading services are required to have internal information systems to guarantee promptly execution of the orders given by investors (Art. 26, paragraph 1, lett. d) of Regulation No. 11522/1998). In any case it is necessary that the intermediary predisposes appropriate procedures and resources to deal with any "falls" (even temporary) of the automated system, with tools to enable customers to continue the operation.

Information on the nature and risks of the operations, and the significant losses: intermediaries must comply the provisions of art. 28, paragraph 2, of Regulation n. 11522/1998, under which it is necessary to provide the investor with adequate information on the nature, risks and implications of the operations, because the knowledge of which is necessary to make informed investment decisions. This obligation have continuing nature and does not end at the first operation.

Adequacy: intermediaries must assess the adequacy of individual the transactions arranged by investors under Article. 29 of Regulation No. 11522/1998, even if the investment service is provided online. This rule requires the intermediary to assess the adequacy of the operation compared to the profile of the investor, preparing and activating specific procedures, to consider operation characteristics in relation to the customer profile. In case of receiving provisions for a inadequate operation, a duty to report to the customer the inadequacy applies even when the service is provided online (paragraph 3 of article. 29 of Regulation No. 11522/1998).

Conflicts of interest: the same observations about the adequacy, apply, with reference to the provision (Art. 27, paragraph 2 of the Regulation no. 11522/1998) that "authorized intermediaries can not carry out transactions on behalf of its customers if they have a direct or indirect conflict of interest, unless they have previously informed in writing the investor on the nature of their interest in the transaction and the investor has expressly agreed in writing the conduct of 'operation. Where the transaction is concluded by telephone, the respect of the disclosure requirements and authorization by the investor must arise from recording on magnetic tape or an equivalent tool”. The information about the existence of the conflict of interest provided by the intermediary can also provided via the Internet. Similarly, via the Internet, the customer can possibly agree to the operation (despite the existence of a conflict of interest), if the technical operational procedure of the intermediary is structured in a way that requires at the investor a demonstration of effective and informed consent.

Declaration of orders, and reporting: in case of receiving orders via the Internet, the obligation of release to the customer of declaration paper (art. 60 of Regulation no. 11522/1998) and the sending of the executed notice or periodic reporting (Art. 61 and art. 62 of Regulation no. 11522/1998) can also be realized through the use of the same network as the Internet, if the technical methods used allow the customer to acquire the availability of documentation on a permanent medium (Art. 75 , paragraph 3 of the Regulation no. 11522/1998).

Procedures: the execution ways of the service, and customer interactions online, make it particularly important to guarantee the observance of the provision whereby intermediaries "equip themselves with appropriate procedures to reconstruct the ways, timing, and characteristics of conduct adopted in the provision of services" (Art. 56, paragraph 2, letter. a) of Regulation No. 11522/1998);

Relationships with supervisory authorities: the intermediary must be able to promptly provide the documentation, from its archives, and to show it to the Supervisory Authorities.

See more:


SMART Trading online Gruppo BPER


Trading Online BAPR


CONSOB, Comunicazione n. DI/30396 del 21 aprile 2000
CONSOB, website
GIRINO E. (2005) Dizionario di finanza. Tecniche-strumenti-operatori, Ipsoa
RINALDI G. M. and  IPERTI F. (2000) La disciplina del trading on line, Consulenza, Buffetti, n.26/2000

Editor: Giovanni AVERSA

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