Regulations, 2005

Suppliment tal-Gazzetta tal-Gvern ta’ Malta, Nru. 17,753, 12 ta’ April, 2005

L.N. 107 of 2005

PREVENTION OF FINANCIAL MARKETS ABUSE ACT, 2005

(ACT NO IV OF 2005)

Prevention of Financial Markets Abuse

(Market Practices and Manipulative Behaviour)

Regulations, 2005

IN exercise of the powers conferred by article 25 of the Prevention

of Financial Markets Abuse Act, 2005, the Prime Minister and Minister

of Finance, after consultation with the Malta Financial Services

Authority, has made the following regulations>-

(1) These regulations may be cited as the Prevention of Citation and

commencement.

Financial Markets Abuse (Market Practices and Manipulative

Behaviour) Regulations, 2005.

(2) These regulations shall come into force on the 1 st April,

2005.

(1)

In these regulations, unless the context otherwise Interpretation.

requires –

“the Act” means the Prevention of Financial Markets Abuse

Act<

“the Community” means the European Community being that

organisation established by the Treaty of Rome in 1957 and

amended institutionally and otherwise in 1986 by the Single

European Act, in 1993 by the Treaty on European Union, in 1997

by the Treaty of Amsterdam and in 2001 by the Treaty of Nice and

as amended by accession agreements and as may be further

amended from time to time<

“implementing measures” means any acts and Directives

issued under the Market Abuse Directive and as amended from

time to time, including in particular for the purpose of these

regulations the provisions of Articles 4 and 5 of Commission

Directive 2003#124#EC of 22 December 2003 implementing the

Market Abuse Directive as regards the definition and public

disclosure of inside information and the definition of market

manipulation<

and the provisions of Articles 2 and 3 of Commission Directive

2004#72#EC of 29 April 2004 implementing the Market Abuse Directive

as regards accepted market practices, the definition of inside information

in relation to derivatives on commodities, the drawing up of lists of

insiders, the notification of managers’ transactions and the notification

of suspicious transactions.

(2) Words and expressions in these regulations which are also

used in the Act have the same meanings as in the Act.

The objective of these regulations is to implement the relevant

provisions of the Market Abuse Directive and all related implementing

measures, and these regulations shall be interpreted and applied

accordingly.

PART I – MARKET PRACTICES

(1) The competent authority shall, when assessing whether

a practice relating to certain transactions or orders to trade in paragraph

(a) of sub-article (2) of article 8 of the Act or derivatives on commodities

in paragraph (a) of sub-article 6 of article 6 of the Act amounts to

market manipulation or constitutes an acceptable market practice, take

the following non-exhaustive factors into account>

(a) the level of transparency of the relevant market practice

to the whole market<

(b) the need to safeguard the operation of market forces and

the proper interplay of the forces of supply and demand and in

particular the competent authority shall analyse the impact of the

relevant market practice against the main market parameters, such

as the specific market conditions before carrying out the relevant

market practice, the weighted average price of a single session or

the daily closing price<

(c) the degree to which the relevant market practice has an

impact on market liquidity and efficiency<

(d) the degree to which the relevant practice takes into

account the trading mechanism of the relevant market and enables

market participants to react properly and in a timely manner to the

new market situation created by that practice<

(e) the risk inherent in the relevant practice for the integrity

of, directly or indirectly, related markets, whether regulated or not,

in the relevant financial instrument within the whole Community<

(f) the outcome of any investigation of the relevant market

practice by any foreign authority, in particular whether the relevant

market practice breached rules or regulations designed to prevent

market abuse, or codes of conduct, be it on the market in question

or on directly or indirectly related markets within the Community<

(g) the structural characteristics of the relevant market

including whether it is regulated or not, the types of financial

instruments traded and the type of market participants, including

the extent of retail investors participation in the relevant market.

(2) The provisions of sub-regulation (1) shall be exercised

by the competent authority without prejudice to any collaboration with

other relevant local authorities or entities necessary or deemed necessary

by the competent authority.

(3) The competent authority shall not assume new or

emerging market practices to be unacceptable simply because they have

not been previously accepted by it.

(4) The competent authority shall review regularly the

market practices that it has accepted, in particular taking into account

significant changes to the relevant market environment, such as changes

to trading rules or to market infrastructure.

(1) The competent authority shall, when considering whether Consultation

procedures and

to accept or continue to accept a particular market practice relating to disclosure of

certain transactions or orders to trade in paragraph (a) of sub-article (2) decisions.

of article 8 of the Act and derivatives on commodities in paragraph (a)

of sub-article 6 of article 6 of the Act, consult as appropriate relevant

bodies such as representatives of issuers, financial services providers,

consumers, other local authorities and market operators. The consultation

procedure shall include consultation of foreign authorities, in particular

where there exist comparable markets, such as in structures, volume,

type of transactions.

(2) This duty in sub-regulation (1) above shall be without

prejudice to the duty of consultation required in Article 11 of the Market

Abuse Directive.

(3) Upon the conclusion of any appeal proceedings or the

lapse of time required to lodge such an appeal, the competent authority

shall publicly disclose its decisions regarding the acceptability of the

market practice concerned, including appropriate descriptions of such

practices and shall transmit its decisions as soon as possible to the

Committee of European Securities Regulators which shall make them

immediately available on its website. The disclosure shall include a

description of the factors taken into account in determining whether the

relevant practice is regarded as acceptable, in particular where different

conclusions have been reached regarding the acceptability of the same

practice on different Member States’ and EEA States’ markets.

(4) When investigatory actions on specific cases have

already started, the consultation procedures set out in sub-regulations

(1) to (3) may be delayed until the end of such investigation and possible

related sanctions.

(5) A market practice which was accepted following the

consultation procedures set out in sub-regulations (1) to (3) shall not be

changed without using the same consultation procedures.

PART II – MANIPULATIVE BEHAVIOUR

For the purposes of properly applying the prohibition of market

manipulation regarding transactions or orders to trade in the Act and

without prejudice to the examples set out therein, market participants

and the competent authority shall take the following non-exhaustive

signals into account when examining transactions or orders to trade>-

(a) the extent to which orders to trade given or transactions

undertaken represent a significant proportion of the daily volume

of transactions in the relevant financial instrument on the regulated

market concerned, in particular when these activities lead to a

significant change in the price of the financial instrument<

(b) the extent to which orders to trade given or transactions

undertaken by persons with a significant buying or selling position

in a financial instrument lead to significant changes in the price of

the financial instrument or related derivative or underlying asset

admitted to trading on a regulated market<

(c) whether transactions undertaken lead to no change in

beneficial ownership of a financial instrument admitted to trading

on a regulated market<

(d) the extent to which orders to trade given or transactions

undertaken include position reversals in a short period and represent

a significant proportion of the daily volume of transactions in the

relevant financial instrument on the regulated market concerned,

and might be associated with significant changes in the price of a

financial instrument admitted to trading on a regulated market<

(e) the extent to which orders to trade given or transactions

undertaken are concentrated within a short time span in the trading

session and lead to a price change which is subsequently reversed<

(f) the extent to which orders to trade given change the

representation of the best bid or offer prices in a financial instrument

admitted to trading on a regulated market, or more generally the

representation of the order book available to market participants,

and are removed before they are executed< and

(g) the extent to which orders to trade are given or

transactions are undertaken at or around a specific time when

reference prices, settlement prices and valuations are calculated

and lead to price changes which have an effect on such prices and

valuations>

Provided that these non exhaustive factors should not

necessarily be deemed in themselves to constitute market

manipulation.

For the purposes of properly applying the prohibition of market Manipulative

behaviours related

manipulation regarding transactions or orders to trade which employ to the employment

fictitious devices or other forms of deception or contrivance in the Act of

or any other form of

and without prejudice to the examples set out therein, market participants deception or

and the competent authority shall take the following non-exhaustive contrivance.

signals into account when examining transactions or orders to trade>-

(a) whether orders to trade given or transactions undertaken

by persons are preceded or followed by dissemination of false or

misleading information by the same persons or persons linked to

them<

(b) whether orders to trade are given or transactions are

undertaken by persons before or after the same persons or persons

linked to them produce or disseminate research or investment

recommendations which are erroneous or biased or demonstrably

influenced by material interest>

Provided that these non exhaustive factors should not

necessarily be deemed in themselves to constitute market

manipulation.

Mitbug[ fl-Istamperija tal-Gvern – Printed at the Government Printing Press