What Is the Madrid Stock Exchange Computer Assisted Trading System (MSE CATS)?

The Madrid Stock Exchange Computer Assisted Trading System (MSE CATS) is an electronic trading platform that was adopted by the Madrid Stock Exchange in 1989. 

In 1995, the MSE CATS was replaced by a more modern system known as the Sistema de Interconexión Bursátil Español (SIBE), or “Spanish Stock Market Interconnection System”.

Key Takeaways

  • The MSE CATS is an electronic trading platform that operated in Madrid between 1989 and 1995.
  • It was based on the CATS system originally developed and utilized by the Toronto Stock Exchange (TSX).
  • MSE CATS helped increase the transparency and efficiency of the stock market, through functions such as order fulfillment, price quotation, trade confirmations, and record-keeping.

How the MSE CATS Works

The CATS, developed by the TSX, was the first ever electronic trading platform to be adopted by a major stock exchange. Through the CATS interface, market participants could see the size and price of each order entered into the market, as well as the identify of the brokers and other market intermediaries placing the orders. The CATS would then find the best possible pairings of buy and sell orders, in order to provide rapid, transparent, and efficient executions.

Upon its inception at the TSX, the CATS was found to be far more efficient than the traditional open-outcry system in which human traders would place and pair orders from the physical trading floor. In addition to its superior speed and accuracy, the CATS would also generate trade confirmations for both the buying and selling brokers, in addition to maintaining permanent records within the CATS. In time, this vast trove of historical transaction records would be seen as a valuable source of market data in itself.

Following its adoption in Toronto, the CATS was implemented in a number of other stock exchanges throughout the 1980s, both in developed and developing markets. One such market was Madrid, which adopted the CATS in 1989. At that time, the MSE had recently undergone a significant restructuring. The adoption of the CATS was seen as an important part of this internal transformation.

Real World Example of the MSE CATS

Initially, the MSE CATS was responsible for facilitating trading in seven large-cap stocks, but this portfolio quickly expanded to 51 stocks by the end of 1989. As in Toronto, it was credited for allowing automation of the price-setting process in a centralized, order-driven stock market.

By 1995, the MSE decided to further invest in its automation technology, replacing CATS with a new electronic trading system known as the Sistema de Interconexión Bursátil Español (SIBE), or “Spanish Stock Market Interconnection System”. This new system successfully connected four Spanish stock exchanges: Madrid, Valencia, Bilbao, and Barcelona. Through the SIBE, these four exchanges were combined to form a unified, continuous market, providing order fulfillment, price information, and other market data in real time.