Investment Services Act (Exemption) (Amendment) Regulations,

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

Taqsima B

L.N. 396 of 2017

Investment Services Act

(Cap. 370)

Investment Services Act (Exemption) (Amendment) Regulations,

IN EXERCISE of the powers conferred by article 12 of the

Investment Services 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 Investment Title, scope and

Services Act (Exemption) (Amendment) Regulations, 2017 and these commencement.

regulations shall be read and construed as one with the Investment S.L. 370.02.

Services Act (Exemption) Regulations, hereinafter referred to as "the

principal regulations".

(2) The objective of these regulations is in part to implement

Article 2 of MiFID as herein defined and they shall be interpreted and

applied accordingly.

(3)

These regulations shall come into force on the 3rd January

2018.

In sub-regulation (2) of regulation 1 of the principal Amends

regulations, for the words "Article 2 of the MiFID Directive,", there regulation

the principal

shall be substituted the words, "Article 4(1) paragraphs 22, 23 and 40, regulations.

Article 2(1) paragraphs (d), (e), (h), (j), (n), (o) and Article 5(2), of

MiFID,".

Regulation 2 of the principal regulations shall be amended Amends

regulation 2 of

as follows

the principal

regulations.

(a) immediately after the definition "alternative

investment fund manager", there shall be inserted the following

new definitions

" "CSD" means a legal person that operates a

securities settlement system as referred to in point (3) of

Section A of the Annex to the CSD Regulation and

provides at least one other of the following core services

listed in Section A of the said Annex

(i) initial recording of securities in a book-

entry system (‘notary service’);

(ii) providing and maintaining securities

accounts at the top tier level (‘central maintenance

service’);

"CSD Regulation" means Regulation (EU) No 909/

2014 of the European Parliament and of the Council of the

23 July 2014 on improving securities settlement in the

European Union and on central securities depositories and

amending Directives 98/28/EC and MiFID and Regulation

(EU) No 236/2012, as may be amended from time to time,

and includes any implementing measures that have been or

may be issued there under;

"Directive 2003/87/EC" means Directive 2003/87/EC

of the European Parliament and of the Council of 13

October 2003 establishing a scheme for greenhouse gas

emission allowance trading within the Community and

amending Council Directive 96/61/EC;

"Directive 2009/72/EC" means Directive 2009/72/EC

of the European Parliament and of the Council of 13 July

2009 concerning common rules for the internal market in

electricity and repealing Directive 2003/54/EC;"

"Directive 2009/73/EC means Directive 2009/73/EC

of the European Parliament and of the Council of 13 July

2009 concerning common rules for the internal market in

natural gas and repealing Directive 2003/55/EC;

"Directive 2013/36/EU" means Directive 2013/36/EU

of the European Parliament and of the Council of 26 June

2013 on access to the activity of credit institutions and the

prudential supervision of credit institutions and Maltese

investment firms, amending Directive 2002/87/EC and

repealing Directives 2006/48/EC and 2006/49/EC;";

(b)

in the definition "European investment firm"

(i) for the words, "article 4 (1) of the Directive",

there shall be substituted the words, "Article 4 (1) of

MiFID"; and

(ii) for the words, "article 5 of the Directive", there

shall be substituted the words, "Article 5 of MiFID";

(c) immediately after the definition "European

investment firm", there shall be inserted the following new

definition

" "high-frequency algorithmic trading technique"

means an algorithmic trading technique characterised by

(i) infrastructure intended to minimise

network and other types of latencies, including at

least one of the following facilities for algorithmic

order entry: co-location, proximity hosting or high-

speed direct electronic access;

(ii) system-determination of order initiation

generation, routing or execution without human

intervention for individual trades or orders; and

(iii) high message intraday rates

which

constitute orders, quotes or cancellations;

(d) immediately after the definition "List of Notified

AIFs", there shall be inserted the following new definition

"Maltese investment firm" means a person licensed in

terms of the Act, whose head office is in Malta and who is

entitled to carry on an activity in a Member State or EEA

State other than Malta in exercise of a European Right;";

(e) for the definition "MiFID Directive", there shall be

substituted the following

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

European Parliament and of the Council of 15 May 2014 on

markets in financial instruments and amending Directive

2002/92/EC and Directive 2011/61/EU, as amended from

time to time, and includes any implementing measures that

have been or may be issued there under;";

(f) for the definition "multilateral trading facility", there

shall be substituted the following

" "multilateral trading facility" or "MTF" means a

multilateral system operated by a Maltese investment firm

or a market operator, which brings together multiple third-

party buying and selling interests in financial instruments –

in the system and in accordance with non-discretionary

rules – in a way that results in a contract in accordance with

the provisions of Title II of MiFID;";

(g)

immediately after the definition "Occupational

Pensions Directive", there shall be inserted the following new

definition

" "organised trading facility" or "OTF" means a

multilateral trading system which is not a regulated market

or an MTF and in which multiple third-party buying and

selling interests in bonds, structured finance products,

emission allowances or derivatives are able to interact in

the system in a way that results in a contract in accordance

with the provisions of Title II of MiFID;"; and

(h) immediately after the definition "professional

investor", there shall be inserted the following new definitions

" "Regulation (EC) No 714/2009" means Regulation

(EC) No 714/2009 of the European Parliament and of the

Council of 13 July 2009 on conditions for access to the

network for cross-border exchanges in electricity and

repealing Regulation (EC) No 1228/2003, as amended from

time to time;

"Regulation (EC) No 715/2009" means Regulation

(EC) No 715/2009 of the European Parliament and of the

Council of 13 July 2009 on conditions for access to the

natural gas transmission networks and repealing Regulation

(EC) No 1775/2005, as amended from time to time;".

Sub-regulation (1) of regulation 3 of the principal

regulations shall be amended as follows

(a) for paragraph (a) thereof, there shall be substituted

the following

"(a) the Central Bank of Malta and the members of

the ESCB and other national bodies performing similar

functions in the Union, other public bodies charged with or

intervening in the management of the public debt in the

Union and international financial institutions established by

two or more Member States which have the purpose of

mobilizing funding and providing financial assistance to

the benefit of their members that are experiencing or

threatened by severe financing problems;";

(b) for paragraph (d) thereof, there shall be substituted

the following

"(d) persons dealing on own account in financial

instruments other than commodity derivatives or emission

allowances or derivatives thereof and not providing any

other investment services or performing any other

investment activities in financial instruments other than

commodity derivatives or emission allowances or

derivatives thereof unless such persons

(i)

are market makers;

(ii) are members of or participants in a

regulated market or an MTF or have direct electronic

access to a trading venue;

(iii) apply a

high-frequency

algorithmic

trading technique; or

(iv) deal on own account when executing

client orders;

Persons exempt under point (p) are not required

to meet the conditions laid down in this point in order

to be exempt.";

(c) for paragraph (g) thereof, there shall be substituted

the following

"(g) persons

providing

investment

services

consisting exclusively in the administration of employee-

participation schemes;

(d) for paragraph (p) thereof, there shall be substituted

the following

"(p) persons

(i) dealing on own account, including market

makers, in commodity derivatives or emission allowances

or derivatives thereof, excluding persons who deal on own

account when executing client orders; or

(ii) providing investment services, other than

dealing on own account, in commodity derivatives or

emission allowances or derivatives thereof to the customers

or suppliers of their main business;

Provided that

a.

for each of those cases individually and

on an aggregate basis this is an ancillary activity to

their main business, when considered on a group

basis, and that main business is not the provision of

investment services within the meaning of MiFID or

banking activities under Directive 2013/36/EU, or

acting as a market-maker in relation to commodity

derivatives;

b.

those persons do not apply a high-

frequency algorithmic trading technique; and

c.

those persons notify annually the relevant

competent authority that they make use of this

exemption and upon request report to the competent

authority the basis on which they consider that their

activity under points (i) and (ii) is ancillary to their

main business;

Provided further that persons exempt under this

paragraph are not required to meet the conditions laid

down in paragraph (d) in order to be exempt;";

(e) for paragraph (q) thereof, there shall be substituted

the following

"(q) a person who manages and, or operates the

business of a regulated market or which is a regulated

market in terms of MiFID, and who operates a MTF or an

OTF in terms of the First Schedule to the Act, subject to the

verification by the competent authority of such person’s

compliance with the requirements which the competent

authority may determine from time to time;";

(f) in paragraph (r) thereof, for the words, "the

Directive", there shall be substituted the words, "MiFID";

(g)

paragraph (x) thereof shall be deleted;

(h) in paragraph (z) thereof, for the words, "the said

service.", there shall be substituted the words, "the said service;";

(i) immediately after paragraph (z) thereof, as amended,

there shall be added the following new paragraphs

"(aa) operators with compliance obligations under

Directive 2003/87/EC who, when dealing in emission

allowances, do not execute client orders and who do not

provide any investment services or perform any investment

activities other than dealing on own account, provided that

those persons do not apply a high-frequency algorithmic

trading technique;

(bb) persons providing investment services which

only involve both the administration of employee-

participation schemes and the provision of investment

services exclusively for their parent undertakings, for their

subsidiaries or for other subsidiaries of their parent

undertakings;

(cc) transmission system operators as defined in

Article 2(4) of Directive 2009/72/EC or Article 2(4) of

Directive 2009/73/EC when carrying out their tasks under

these Directives, under Regulation (EC) No 714/2009,

under Regulation (EC) No 715/2009 or under network

codes or guidelines adopted pursuant to those Regulations,

any persons acting as service providers on their behalf to

carry out their task under those legislative acts or under

network codes or guidelines adopted pursuant to those

Regulations, and any operator or administrator of an energy

balancing mechanism, pipeline network or system to keep

in balance the supplies and uses of energy when carrying

out such tasks

Provided that this exemption shall apply to persons

engaged in the activities set out in this point only where

they perform investment activities or provide investment

services relating to commodity derivatives in order to carry

out those activities and shall not apply with regard to the

operation of a secondary market, including a platform for

secondary trading in financial transmission rights;

(dd) CSDs that are regulated as such under the

Financial Markets Act, to the extent that they are regulated Cap. 345.

under the Financial Markets Act.".

€0.36