The Ultimate Guide to
The four regional stock markets in Spain are operated by the Bolsas y Mercados Españoles (BMEX) holding company that was founded in 2002 in Madrid, Spain. The four regional Spanish exchanges are the Stock Exchange of Madrid or Bolsa de Madrid, the Stock Exchange of Barcelona or Bolsa de Barcelona, the Stock Exchange of Bilbao or Bolsa de Bilbao and the Stock Exchange of Valencia or Bolsa de Valencia.
In addition, the BMEX operates a futures and options exchange called the Official Market of Options and Financial Futures in Spain (MEFF) that lists futures and options on government bonds, the IBEX-35 stock index futures and stock options. The IBEX 35 is the narrow benchmark stock market index for the Bolsa de Madrid, Spain’s largest stock exchange.
The BME also runs two fixed income securities exchanges called the Mercado de Renta Fija SA (AIAF) and the Mercado Alternative de Renta Fija or Alternative Fixed Income Market (MARF). The primary Spanish private fixed income benchmark index is called the AIAF 2000 Index.
Forex traders will certainly be familiar with the euro (EUR) issued by the European Union and managed by the European Central Bank. The Bank for International Settlements (BIS) ranks the euro second among the most actively traded currencies of 2016, accounting for about 31.4% of the overall turnover in the forex market. The euro also ranked second among currencies kept as reserves by central banks, making up roughly 19% of such reserves in Q3 2018 according to the International Monetary Fund (IMF).
Finally, financial regulation in Spain is broken down into three categories. The primary investment sector regulator is the Spanish Securities Market Commission or Comisión Nacional del Mercado de Valores (CNMV), which also regulates forex trading and ensures compliance with the EU’s markets in financial instruments directive (MiFID).The insurance and pension fund sector in Spain is regulated by the Dirección General de Seguros y Fondos de Pensiones (DGSFP), while the banking sector regulator is the Bank of Spain or Banco de España (BDE), which is the Spanish central bank.
How to Trade in Spain
For prospective traders, there are numerous online forex brokers situated in Spain or in the EU to select from. Traders living in Spain may also deposit money to trade online using accounts that are opened with any non-EU broker that will take them on as a client.
Fortunately, most online brokers that offer forex or contract for difference (CFD) trading will accept clients from Spain, although having a broker with an EU office is generally preferred as they must abide by the EU’s MiFID regulations. Moreover, EU based brokers will also have a reputation to uphold with the CNMV, and you can generally litigate in the EU should any issues arise with them.
Alternatively, if opting for a non-EU broker, traders should always ensure that the broker is well regulated. Aspects to consider are where and how the broker holds clients’ funds (i.e. does the broker hold client funds segregated from their own money), if the broker has a good general reputation with their clients and also the range of services they offer.
Both asset classes and stock trading are available to trade online. Regarding asset classes that are available to trade online, the selection can vary substantially among brokers. Although the majority of online brokers make some form of currency trading available to clients, not all of them provide CFD trading that usually allows traders to operate in a broader range of tradable assets.
Whilst, in relation to stock trading, the BMEX’s four supervised regional stock exchanges provide fair and transparent markets in numerous Spanish stocks and other asset classes. Trades on these exchanges are generally executed in euros. The consolidated BMEX exchanges operate based on an electronic trading platform called SIBE that was developed inhouse and facilitates the full interconnection of the four regional Spanish stock exchanges. In addition to stocks, SIBE also supports products like ETFs, certificates, warrants and various other instruments.
For trading Spanish public debt and some assets listed on AIAF, the wholesale electronic trading platform used by institutional members is known as the Electronic Financial Assets Trading System (SENAF). Furthermore, all fixed income assets traded on the Spanish stock exchanges are traded via an electronic market with real time data. Market members can access this platform through SIBE terminals.
Furthermore, just as our guide to setting up demo accounts explains, most online brokers will provide traders with a demo account with virtual money that can be used to test their services, practice trading strategies and to try out trading on their platform
Biggest Opportunities of Trading in Spain
Spain has a long tradition with respect to its financial services sector. As one of the largest economies in the EU, Spanish GDP reached USD 1.314 trillion in 2017 and continues to offer business opportunities in a number of areas, including major infrastructure projects. Spain has also recently reformed its financial sector and labour laws, which have cut the costs of doing business in Spain compared to other countries in the EU. In addition, doing business in Spain could open the possibility of acquiring value-added partners in the countries in Latin America and the Caribbean where Spanish is the common language.
With respect to trading across borders, Spain achieved the top ranking among countries surveyed by the World Bank assisted by its status as an EU country. Spain also ranked highly in resolving insolvencies and enforcing contracts, where the country scored 19th and 23rd respectively, and it also ranked 30th overall with respect to the ease of doing business.
Biggest Challenges of Trading in Spain
The EU countries of France, Germany, Italy, Portugal and the UK are among Spain’s largest and nearest trading partners. This is why in February 2019, as reported by the Spanish newspaper El Pais, the Spanish Tax Agency sent letters to Spanish exporters warning them of detrimental impacts such as new custom and tax obligations, that the UK’s scheduled exit of the EU will have on Spanish exports.
Moreover, Spain’s dependence on foreign oil and imports of high added value goods results in a systemic trade deficit. As a consistent net importer with a reported negative balance of trade numbers since 1962, Spain’s economic situation could be adversely affected by trade tariffs, trade wars and the failure of trading partners to adhere to key trade accords.
As per the World Bank, Spain’s rank for starting a business, dealing with construction permits and obtaining credit was 86th, 78th and 73rd respectively. Other areas of difficulty included registering property at 58th and the supply of electricity at 48th.
Overall, traders and businesses will generally find Spain a rather safe place to operate due to its participation in the European Union. This, coupled with Spanish financial institutions being regulated by the CNMV and online brokers by the EU’s strict MiFID regulations, heightens its stability.
To conclude, those seeking an online broker to trade from Spain will want to understand the broker’s range of asset classes, regulatory oversight, trading platform and reputation. A reputable broker should also provide adequate security for a margin deposit and keep clients funds separate from their own money.