Operating an MTF and a Crowdfunding Platform: The Key Differences

Although emerging from different regulatory frameworks, the operation of a Multilateral Trading Facility (“MTF”) and a Crowdfunding Platform share certain similarities which may at times blur their significant distinguishing features. For instance, both an MTF and a Crowdfunding Platform serve as intermediaries which bring together buyers and sellers or investors and fundraisers. Also, both an MTF and a Crowdfunding Platform provide access to capital or funding opportunities: an MTF allows companies to raise capital by listing their securities which facilitates trading, while a Crowdfunding Platform enables businesses and start-ups to raise funds from a large group of investors.

Nevertheless, there are some key differences between operating an MTF and a Crowdfunding Platform, which can be identified as follows:


  • The purpose behind an MTF and a Crowdfunding Platform differs. The primary purpose of an MTF is to provide a regulated marketplace for the trading of financial instruments. It facilitates the buying and selling of securities (such as stocks, bonds, derivatives, and other tradeable instruments).
  • Contrastingly, the main purpose behind operating a Crowdfunding Platform is to connect innovators, entrepreneurs, and start-up owners with potential investors. Crowdfunding enables individuals or organisations to raise funds for specific projects, initiatives, or causes, often through the participation of a large number of individual contributors.

Regulatory Framework

  • MTFs, which are regulated by the Markets in Financial Instruments Directive (“MiFID II”) in the European Union (“EU”), operate within a regulated environment. They are subject to specific rules and oversight by national financial authorities. They are also required to comply with rules and regulations related to trading, reporting, transparency, investor protection, and other relevant market rules.
  • On the other hand, there had been no EU harmonised regulatory framework on crowdfunding until recently, and therefore, Crowdfunding Platforms operated with different regulatory frameworks, depending on the jurisdiction and the type of crowdfunding model employed. With the introduction of the European Crowdfunding Service Providers Regulation (“ECSPR”), investment-based and lending-based crowdfunding within the EU, is not subject to the same harmonised regulation. Other types of crowdfunding, such as donation-based and reward-based crowdfunding, remain as yet unregulated by the EU.

Nature of Transactions

  • MTFs facilitate the trading of financial instruments through various types of transactions, such as buying and selling securities, execution of trades, and order matching. Operating an MTF provides a platform for market participants to interact and transact within  regulated market.
  • Meanwhile, a crowdfunding service provider operates the Platform to facilitate funding transactions between Project Owners and Investors. Under the ECSPR, the nature and type of the transactions can vary from investment-based (investment in exchange for equity or shares in a company) to lending-based (concluding a loan agreement). There are other types of unregulated crowdfunding, such as donation-based (non-repayable contributions), and rewards-based (rewards offered to the contributors).


  • Typically, an MTF involves a range of market participants (including institutional investors, broker-dealers, market makers, and individual traders) who engage in trading activities for the purpose of buying or selling financial instruments and make profit through market movements.
  • This contrasts with the participants in a crowdfunding transaction, where the Investors contribute to fund a project of a Project Owner through either an investment or a loan. In return, the Investors receive shares within the company in which they invested or interest from the loan concluded.

In conclusion, the primary purpose, regulatory framework, types of transactions facilitated, and participants involved provide distinguishable features between MTFs and Crowdfunding Platforms. Generally, MTFs are focused on providing regulated trading venues for financial instrument transactions, while Crowdfunding Platforms enable companies (mostly start-ups) to raise funds from a broad base of Investors for their particular projects.

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