Regulated Markets (Authorisation Requirements)

Suppliment tal-Gazzetta tal-Gvern ta’ Malta Nru. 19,925, 22 ta’ Diċembru, 2017

Taqsima B

L.N. 385 of 2017

FINANCIAL MARKETS ACT

(CAP. 345)

Regulated Markets (Authorisation Requirements)

(Amendment) Regulations, 2017

IN EXERCISE of the powers conferred by article 49 of the

Financial Markets Act, the Minister responsible for the regulation of

financial services, acting on the advice of the Malta Financial

Services Authority, has made the following regulations

(1)

The title of these regulations is the Regulated Title and

Markets (Authorisation Requirements) (Amendment) Regulations, Commencement

.

2017, and these regulations shall be read and construed as one with

the Regulated Markets (Authorisation Requirements) Regulations, S.L. 345.04.

hereinafter referred to as "the principal regulations".

(2) These regulations shall come into force on the 3rd January

2018.

The title of the principal regulations shall be substituted by Amends the title

of the principal

the following

regulations.

"Regulated Markets and Market Operators (Authorisation

Requirements) Regulations".

Regulation 1 of the principal regulations, shall be Amends

regulation 1 of

substituted by the following

the principal

regulations.

"1.

(1)

The title of these regulations is the

Regulated Markets and Market Operators (Authorisation

Requirements) Regulations.

(2)

The purpose of these regulations is to transpose and

implement Article 45(1) to (3), sub-paragraphs (1) to (4) of

Article 45(4), Article 45(5) to (8), Article 47, Article 53 and

Article 54(1) to (3) of MiFID, as herein defined and shall be

interpreted and applied accordingly.".

Regulation 2 of the principal regulations shall be amended Amends

regulation 2 of

as follows

the principal

regulations.

(a)

for the definition "applicant", there shall be

substituted the following

" "applicant" means a person who has submitted an

application to the competent authority to become

authorized as a regulated market or market operator;";

(b)

the definition "the Directive" shall be deleted;

(c)

for the definition "European regulated market",

there shall be substituted the following

" "European regulated market" means a regulated

market as defined in Article 4(1)(21) of MiFID authorised

by its European regulatory authority within the meaning of

Article 44 of MiFID;";

(d)

immediately after the definition "European

regulated market", as amended, there shall be inserted the

following new definitions

" "market operator" means a person or persons who

manages and, or operates the business of a regulated

market and may be the regulated market itself;

"MiFID" means Directive 2014/65/EU of the

European Parliament and of the Council of 15 May 2014

on markets in financial instruments, as amended from time

to time, and includes any implementing measures that have

been or may be issued thereunder;

"Regulation (EU) No 596/2014" means Regulation

(EU) No 596/2014 of the European Parliament and of the

Council of 16 April 2014 on market abuse as amended

from time to time, and includes any implementing

measures that have been or may be issued thereunder;".

For regulation 3 of the principal regulations there shall be

substituted the following

"3.

The Schedule sets out the authorisation

requirements which must be satisfied by an applicant if it is to

qualify as a regulated market or a market operator and which

must be satisfied by each regulated market or market operator

on a continuing and ongoing basis if it is to remain a regulated

market or a market operator.".

Regulation 4 of the principal regulations shall be amended

as follows

(a)

in sub-regulation (1) thereof, for the words, "an

applicant or a regulated market satisfies", there shall be

substituted the words, "an applicant, a regulated market or a

market operator satisfies";

(b)

in sub-regulation (2) thereof, for the words, "An

applicant or a regulated market may", there shall be substituted

the words, "An applicant, a regulated market or a market

operator may";

(c)

in sub-regulation (3) thereof

(i) for the words, "an applicant or a regulated

market, as the case may be,", there shall be substituted the

words, "an applicant, a regulated market or a market

operator, as the case may be,"; and

(ii) for the words, "such applicant or a regulated

market.", there shall be substituted the words, "such

applicant, regulated market or market operator.";

(d)

in sub-regulation (4) thereof

(i) for the words, "Where an applicant or a

regulated market enters", there shall be substituted the

words, "Where an applicant, a regulated market or a

market operator enters"; and

(ii) for the words, "on such applicant or regulated

market to", there shall be substituted the words, "on such

applicant, regulated market or market operator to";

(e)

in sub-regulation (5) thereof

(i) for the words, "of the regulated market for",

there shall be substituted the words, "of the regulated

market or market operator for"; and

(ii) for the words, "of the regulated market

entering", there shall be substituted the words, "of the

regulated market or the market operator entering";

(f)

in sub-regulation (6) thereof

(i) for the words, "not being a regulated

market,", there shall be substituted the words, "not being a

regulated market or a market operator,";

(ii) for the words, "by the applicant or the

regulated market as the case may be,", there shall be

substituted the words, "by the applicant, the regulated

market or the market operator as the case may be,"; and

(iii) for the words, "of the applicant or regulated

market," there shall be substituted the words, "of the

applicant, the regulated market or the market operator,";

(g)

in sub-regulation (7) thereof, for the words, "the

regulated market shall be", there shall be substituted the words,

"the regulated market or the market operator shall be".

Immediately after regulation 4 of the principal regulations

there shall be inserted the following new regulation

5. (1)

Where a person falling within the

scope of these regulations fails to comply with any

provisions of such regulations or any rules issued

thereunder further implementing such regulations,

the competent authority may, by notice in writing

and without recourse to a court hearing, impose on

such person an administrative penalty and other

administrative measures in accordance with the

provisions of the Financial Markets Act (MiFID and

MiFIR Administrative Penalties, Measures and

Investigatory Powers) Regulations, 2017.

(2) A right of appeal to the Financial

Services Tribunal shall lie from the decisions which

the competent authority shall take under these

regulations and the provisions of Part VI of the Act

shall apply mutatis mutandis.".

The Schedule to the principal regulations shall be amended

(a) for paragraph 2 thereof there shall be substituted the

"Requirements for the management body of a market

operator or regulated market

2. (1) The market operator or regulated

market must be a fit and proper person to perform its

functions and be of good standing.

(2) The persons who effectively direct the

business and the operations of a regulated market must

satisfy the fit and proper criterion, by being of sufficient

good repute and possess sufficient knowledge, skills and

experience to perform their duties so as to ensure the sound

and prudent management and operation of the regulated

market. The overall composition of the management body

shall reflect an adequately broad range of experience

Provided that in the process of authorisation

of a regulated market, the person or persons who

effectively direct the business and operations of an already

authorised regulated market in accordance with the

provisions of MiFID shall be deemed to comply with the

requirements prescribed in sub-paragraph (2) above.

(3) Members of the management body shall, in

particular, fulfil the following requirements

(a) All members of the management body shall

commit sufficient time to perform their functions in the

market operator. The number of directorships a member of

the management body can hold, in any legal entity, at the

same time shall take into account individual circumstances

and the nature, scale and complexity of the market

operator’s activities.

(b) Unless representing the Government of

Malta, members of the management body of a market

operators that is significant in terms of its size, internal

organisation and the nature, the scope and the complexity

of its activities shall not at the same time hold positions

exceeding more than one of the following combinations

(i)

one executive directorship with two non-

executive directorships;

(ii)

four non-executive directorships

Provided that executive or non-executive

directorships held within the same group or

undertakings where the market operator owns a

qualifying holding shall be considered to be one

single directorship;

Provided

further

that

directorships

in

organisations which do not pursue predominantly

commercial objectives shall be exempt from the

limitation on the number of directorships a member

of a management body can hold.

(c) The competent authority may authorise

members of the management body to hold one additional

non-executive directorship. The competent authority shall

regularly inform ESMA of such authorisations.

(d) The management body shall possess adequate

collective knowledge, skills and experience to be able to

understand the market operator’s activities, including the

main risks.

(e) Each member of the management body shall

act with honesty, integrity and independence of mind to

effectively assess and challenge the decisions of the senior

management where necessary and to effectively oversee

and monitor decision-making.

(4) A market operator shall devote adequate

human and financial resources to the induction and

training of members of the management body.

(5) A market operator which is significant in

terms of its size, internal organisation and the nature, scope

and complexity of its activities shall establish a nomination

committee composed of members of the management body

who do not perform any executive function in the market

operator concerned.

(6) The nomination committee shall carry out the

following functions

(a) identify and recommend, for the approval of

the management body or for approval of the general

meeting, candidates to fill management body vacancies. In

doing so, the nomination committee shall evaluate the

balance of knowledge, skills, diversity and experience of

the management body. Further, the committee shall prepare

a description of the roles and capabilities for a particular

appointment, and assess the time commitment expected.

Furthermore, the nomination committee shall decide on a

target for the representation of the under-represented

gender in the management body and prepare a policy on

how to increase the number of the under-represented

gender in the management body in order to meet that

target;

(b) periodically, and at least annually, assess the

structure, size, composition and performance of the

management body, and make recommendations to the

management body with regard to any changes;

(c) periodically, and at least annually, assess the

knowledge, skills and experience of individual members of

the management body and of the management body

collectively, and report to the management body

accordingly;

(d) periodically review the policy of the

management body for selection and appointment of senior

management and make recommendations to the

management body.

(7) In performing its duties, the nomination

committee shall, to the extent possible and on an ongoing

basis, take account of the need to ensure that the

management body’s decision making is not dominated by

any one individual or small group of individuals in a

manner that is detrimental to the interests of the market

operator as a whole.

(8) In performing its duties, the nomination

committee shall be able to use any forms of resources it

deems appropriate, including external advice.

(9) A market operator and its respective

nomination committee shall engage a broad set of qualities

and competences when recruiting members to the

management body. A policy promoting diversity on the

management body shall be put in place for this purpose.

(10) The management body of a market operator

shall define and oversee the implementation of the

governance arrangements that ensure effective and prudent

management of an organisation, including the segregation

of duties in the organisation and the prevention of conflicts

of interest, and in a manner that promotes the integrity of

the market.

(11) The management body shall monitor and

periodically assess the effectiveness of the market

operator’s governance arrangements and take appropriate

steps to address any deficiencies.

(12) Members of the management body shall have

adequate access to information and documents which are

needed to oversee and monitor management decision-

making.

(13) The competent authority shall refuse

authorisation if it is not satisfied that the members of the

management body of the market operator are of

sufficiently good repute, possess sufficient knowledge,

skills and experience and commit sufficient time to

perform their functions, or if there are objective and

demonstrable grounds for believing that the management

body of the market operator may pose a threat to its

effective, sound and prudent management and to the

adequate consideration of the integrity of the market.

(14) The market operator shall notify the

competent authority of the identity of all members of its

management body and of any changes to its membership,

along with all the information needed to assess whether the

market operator complies with sub-paragraphs (1) to (8)

above.";

(b) paragraph 3 thereof shall be amended as follows

(i)

for indent (a) of sub-paragraph (2) thereof, there

shall be substituted the following

"(a) it has available on an ongoing basis, sufficient

financial resources to facilitate its orderly functioning,

having regard to the nature and extent of the transactions

concluded on the market and the range and degree of the

risks to which it is exposed;";

(ii)

for sub-paragraph (3) thereof, there shall be

substituted the following

"(3) The regulated market shall have transparent

and non-discretionary bye-laws and procedures that

provide for fair and orderly trading and establish objective

criteria for the execution of orders.";

(iii)

immediately after sub-paragraph (3) of paragraph 3

thereof, there shall be inserted the following new sub-paragraph

(4)

"(4) A market operator shall not be allowed to

execute client orders against proprietary capital, or to

engage in matched principal trading on any of the

regulated markets it operates.";

(c)

sub-paragraph (3) of paragraph 4 thereof shall be deleted;

(d) paragraph 5 thereof shall be amended as follows

(i) in indent (a) of sub-paragraph (1) thereof,

immediately after the words, "and procedures", there shall

be inserted the words, "including the necessary resource";

(ii) for indent (b) of sub-paragraph (1) thereof,

there shall be substituted the following

"(b) monitor

orders

sent

including

cancellations and the transactions undertaken by

their members or participants under their systems in

order to identify infringements of those rules,

disorderly trading conditions or conduct that may

indicate behaviour prohibited under Regulation (EU)

No 596/2014 or system disruptions in relation to a

financial instrument.";

(iii) for sub-paragraph (2) thereof, there shall be

substituted the following

"(2)

A market operator of a regulated

market shall

(a) immediately inform the competent

authority of significant infringements of its

rules or disorderly trading conditions or

conduct that may indicate behaviour that is

prohibited under Regulation (EU) No. 596/2014

or system disruptions in relation to a financial

instrument

Provided that the competent authority

shall communicate this information to ESMA

and to the competent authorities of the other

Member States or EEA States;

Provided further that in relation to

conduct that may indicate behaviour that is

prohibited under Regulation (EU) No. 596/

2014, the competent authority shall be

convinced that such behaviour is being or has

been carried out before it notifies the competent

authorities of the other Member States or EEA

States and ESMA;

(b) supply the relevant information

without undue delay to the authority competent

for the investigation and prosecution of market

abuse on the regulated market and to provide

full assistance to the latter in investigating and

prosecuting market abuse occurring on or

through the systems of the regulated market.".

€0.45