Malta Government Stocks Regulations, 2018

L.N. 402 of 2018

GOVERNMENT BORROWING AND MANAGEMENT

OF PUBLIC DEBT ACT

(CAP. 575)

Malta Government Stocks Regulations, 2018

IN exercise of the powers conferred by article 71 of the

Government Borrowing and Management of Public Debt Act, the

Minister for Finance has made the following regulations

(1)

The title of these regulations is the Malta

Government Stocks Regulations, 2018.

(2) These regulations shall be deemed to have come into force

on 1st September 2017.

In these regulations, unless the context otherwise requires

"Accountant General" means the Accountant General of the

Government of Malta who heads the Treasury Department;

"the Act" means the Government Borrowing and Management

of Public Debt Act;

"business day" means a day other than a Saturday, a national or

public holiday listed in articles 2 and 5(1) of the National Holidays

and other Public Holidays Act, a bank holiday as declared under

article 3(2)(b) of the Banking Act or a day when the Trans-European

Automated Real-time Gross settlement Express Transfer system

(TARGET), owned and operated by the Eurosystem, is closed for

business as may be published on European Central Bank’s website;

"Central Securities Depository" has the same meaning as is

assigned to it by article 2 of the Financial Markets Act;

"combined issuance" means a two-pronged participation

mechanism in a Malta Government Stock issue, offered for

subscription

(a)

in part non-competitively at pre-announced fixed

retail segment; and simultaneously

(b)

by competitive auction;

"competent authority" means the person or body appointed by

the Minister to carry out the functions of competent authority under

the Financial Markets Act;

"conversions and switch auctions" mean the methods by which

one stock can be exchanged for another;

"cut-off price" means the minimum price set by the Accountant

General at which bids are accepted;

"claims" in respect of Malta Government Stocks include both

the principal repayment and the interest due, if any, on the said Malta

Government Stocks;

"General Prospectus" means the legal document to be issued by

the Accountant General and approved by the competent authority,

which supplements and is subject to the specific terms and

information set out in the offering circular. The General Prospectus

sets out some of the important terms of such Malta Government

Stocks and information relating to it including

(a)

information about mechanism of issuance;

(b)

methods of application for Stock;

(c)

allotment policy;

(d)

settlement of successful bids;

(e)

refunds of monies in respect of unallocated retail

subscriptions;

(f)

full terms of the Collective Action Clauses

(CACs);

(g)

taxation;

(h)

the jurisdiction; and

(i)

the governing law;

"Government" means the Government of Malta unless

otherwise specified;

"Malta" has the same meaning as is assigned to it by article 124

of the Constitution;

"Minister" means the Minister responsible for finance;

"offering circular" means a circular to be issued by the

Accountant General to announce the issuance of Malta Government

Stocks and to specify amongst others the sum of money to be raised,

the mode or modes of raising such stock; the coupon interest payable

on the stock; the date or dates when the interest on the stock shall be

payable; the settlement date and the date of redemption of the Stock;

"person" means a natural or legal person;

"pre-announced fixed price" means the price payable per €100

nominal Malta Government Stock published in advance by the

Accountant General in respect of the non-competitive subscription

part of a Malta Government Stock issuance, which part is intended for

retail investors;

"publication" has the same meaning as assigned to it by article 2

of the Act;

"Register" has the same meaning as assigned to it by article 2 of

the Act;

"Retail Investors" mean non-professional investors typically

made-up of members of the public;

"sinking fund" has the same meaning as assigned to it by article

2 of the Act;

"stockholder" means any natural or legal person in whose name

or names the Malta Government Stock is entered or registered in the

Register;

"Stocks" means the Malta Government Stocks issued pursuant

to these regulations.

(1)

These regulations describe the arrangements for the

issuance of Stock, a negotiable debt security with a maturity of more

than one year known by the market as Malta Government Stock. The

purpose of these regulations mainly covers the mechanism of

issuance and operational arrangements in the primary market in

respect of Malta Government Stocks issued in the domestic market

which the Accountant General undertakes in implementing the debt

management remit, including the issuance of

(a)

Conventional Fixed Rate Malta Government Stock;

(b)

Floating rate Malta Government Stock; and

(c)

other market operations.

(2) These regulations set out the normal market operations in

the primary market, which the Accountant General undertakes in the

Malta Government Stock market. In exceptional circumstances or

when obliged by law to do so, the Accountant General may on

occasion undertake operations at his discretion or as required by other

statutory obligations.

(3) The applicability of the regulations is to be construed with

the specific terms and conditions set out in the General Prospectus of

Malta Government Stocks as well as the offering circular relating to

each particular issue of Stock.

(1)

The Conventional Fixed Rate Malta Government Debt securities

Stocks and Floating Rate Malta Government Stocks are issued by the issued,

power to issue.

Accountant General through the Debt Management Directorate on

behalf of the Government of Malta under the authority contained in

the Government Borrowing and Management of Public Debt Act and

other statutes

(a)

the Conventional Fixed Rate Malta Government

Stock is a tradeable security which pays the holder a fixed

interest payment (half the coupon) every six months in arrears

until the maturity of the Stock; and

(b)

the Floating Rate Malta Government Stock is a

tradeable security which pays the holder an interest payment

periodically (normally every six months) in arrears, where the

interest rate is fixed periodically (normally every six months) in

advance at a specified fixed spread over a recognised money

market rate.

(2) The Malta Government Stocks are issued in Euro currency

and every person can subscribe for the Stock.

The issuance of Malta Government Stocks in the Primary Market

(1)

Annually, by not later than end of January, the Policy and the

Accountant General shall publish the annual borrowing plan for an financing remit.

entire financial year (January - December), stating among other

things the maximum amount of cash that can be raised through debt

securities and debt instruments including conventional and floating

rate Malta Government Stocks. The Accountant General shall

publish

(a)

an indicative number of issuances;

(b)

indicative intervals within which the Stocks shall

be issued; and

(c)

indicative maturity band of Malta Government

The indicative issuance calendar shall be updated as provided

for under article 18(5) of the Act.

(2) The annual borrowing plan may be varied during the year

in the light of any substantial changes from the original or the updated

Annual Borrowing Plan. Any such variations to the issuance

programme shall be announced in an updated annual borrowing plan

to be published in terms of article 18(6) of the Act.

In terms of article 25(1) of the Act, the Accountant

General shall publish

(a)

a General Prospectus which shall contain the

general terms and conditions of Malta Government Stocks; and

(b)

the offering circular which shall contain the

specific and final terms and conditions related to that issue

including the issuance amount.

(2) The General Prospectus sets out some of the important

terms under which the Stocks are issued and information related to it

(a)

general information on the applicable legal

framework of issuance and the main features and characteristics

of the Malta Government Stocks;

(b)

the different types of Malta Government Stocks

(c)

information on the issuance mechanism including,

competitive and non-competitive issuances;

(d)

methods of application for Stock, including

bidding, pricing and indicative pricing guidelines;

(e)

Fungibility (Tap) Issues;

(f)

settlement of successful bids and applications;

(g)

allotment policy and refunds of monies in respect

of prepaid unallotted applications;

(h)

conversions and switch auctions;

(i)

information on the computation of first interest

(coupon) payment and coupon interest calculation thereafter;

(j)

method of payment in respect of payment of

coupon interest and payment of principal on maturity;

(k)

underissuance;

(l)

registration, notices of registration and the

(m)

full terms of the Collective Action Clauses;

(n)

taxation; and

(o)

security, prescription, jurisdiction, governing law,

data protection clauses and right of revision of the General

Prospectus.

(3) The offering circular shall contain the specific terms and

conditions linked to a particular Malta Government Stock issuance,

(a)

the issuer and the specific legal framework

applicable to the particular issuance;

(b)

the sum of money to be raised;

(c)

the description of the Stock or Stocks on issue;

(d)

the method of issuance;

(e)

information on the application for the Stocks to be

admitted to the Official List and for admissibility to trading on

the Stock Exchange;

(f)

the opening and latest dates and time for receipt of

applications;

(g)

reference to announcements in respect of

(i) pricing guidelines linked to competitive

auctions; and

(ii) publication of pre-announced fixed prices for

non-competitive applications;

(h)

the methods of

application

in

the

Malta

Government Stock issuances;

(i)

maturity date of the Stock;

(j)

settlement of competitive bids and non-competitive

applications;

(k)

interest, including frequency and interest payment

dates;

(l)

computation of first interest payment date;

(m)

the rate, if any, at which a half-yearly appropriation

out of the general revenue and assets of the Government of

Malta shall be made as a contribution to the sinking fund

established for the purpose of redeeming that stock and the

period within which such contribution shall commence; and

(n)

any other terms and conditions specifically

applicable to the Malta Government Stock on issue.

(1)

The Accountant General may issue the Malta

Government Stocks either directly or through the appointment of one

or more licensed financial institutions and licensed investment

services providers, as considered appropriate, to sell the Malta

Government Stocks on behalf of the Government. The Accountant

General may enter into any contract or agreement relating to such

terms and conditions that he may consider appropriate.

(2) The Stocks may be issued competitively by a pre-

announced competitive auction only, or by a combined issuance

consisting of

(a)

in part by a competitive auction; and

(b)

in part non-competitively at a pre-announced fixed

(3) In order to help delivering the overall financing

programme effectively, the Accountant General may implement

supplementary issuance methods as provided for under article 24(1)

of the Act, as deemed necessary either by special announcement or by

means of a supplement or revision of these regulations.

(4) The prices of Malta Government Stocks are issued and

quoted in terms of €100 nominal.

(5) The Accountant General may offer one or more Stocks in

any maturity not exceeding sixty years in any offer of Malta

Government Stocks.

(6) Where more than one Stock is offered in an issue, the

Accountant General may not assign a specific amount for each Stock.

This is subject to the provision that the total amount of bids (or offers)

and applications accepted in all Stocks do not exceed the amount

offered in the issue including the over-allotment option.

Issuance Mechanism of Malta Government Stocks

(1)

The Accountant General shall announce the Prior notice of

issuance around ten (10) days before the opening of applications issuances.

through the offering circular containing the terms and conditions

specifically related to that issuance. The offering circular will be

published on the Treasury Department website and in the Gazette and

shall include

(a)

the amount of Stock(s) to be issued;

(b)

the identity of each individual Malta Government

Stock on offer;

(c)

the disclosure of the method of issuance, that is

(i)

either through a competitive auction only; or

(ii) a combined issuance composed of two

elements namely,

(A) non-competitive at a pre-announced

fixed price for up to a specified amount per person

intended for the retail segment; and simultaneously

(B)

by competitive auction; and

(d)

coupons.

(2) The price guidance, or pre-announced fixed prices, are

normally fixed closer to the opening date of applications itself.

(1)

A combined issuance is an offer composed of two Combined

issuance elements, typically intended for two different categories of issuances.

investors, namely

(a)

the retail sector which are offered the Stocks non-

competitively at pre-announced fixed price and subject to a

maximum subscription amount per person to be established in

the General Prospectus; and

(b)

wholesale investors which participate separately

via a pre-announced competitive auction in accordance with the

terms of the General Prospectus and offering circular.

(2) After the designated time window deadline for submission

of applications at pre-announced fixed price (for the retail sector) has

passed, the Accountant General shall calculate the total value of

applications received and auction the remaining amount (if any) from

the issuance amount to wholesale investors on the dates announced on

the offering circular. In a combined issuance, the Accountant General

shall not disclose the remaining amount available for the auction after

the closure deadline of the time window designated for the non-

competitive applications.

(3) The Accountant General may cancel the auction as soon as

there are indications that the value of applications received from the

applicants participating at pre-announced fixed prices is deemed to be

close or exceeds the amount on issue including the over-allotment

option. In any case the cancellation of the auction is to be announced to

the market by not later than one business day after the closing date of

applications for the retail sector.

(4) Persons who opt to subscribe at a pre-announced fixed

(5) The Accountant General reserves the right to reject

applications if the applicant has failed to comply with the terms and

conditions of the General Prospectus or of the offering circular, or for

any reason whatsoever.

(6) The published results of a combined Malta Government

Stock issue shall be issued after the closure of the auction and shall

account separately for the results of the auction and the results of

applications made through the pre-announced fixed price. The result

shall comprise the total value of all valid applications and bids

received, amounts allotted and rejected in whole or in part on account

of price, and the ratio of the total value of applications and bids

received to the amount on offer (the ‘cover ratio’).

(7) The Accountant General reserves the right not to allot all

of the Malta Government Stock on offer in a combined issuance, if he

judges bids at the auction to be at an unacceptably deep discount to

the prevailing market level and therefore not at fair value.

(1)

The format of the auction used by the Accountant

General to issue Malta Government Stocks both in a combined

issuance as well as via auction only is through a multiple price

auction and in both cases are subject to the same auction mechanics.

The auctions are held on a bid price basis where the successful

bidders pay the price that they bid.

(2) Participation in the auction is open to all eligible investors

by direct bidding. Competitive bids at auctions must be submitted on

the prescribed application form, and are to be sent electronically on

the fax number prescribed by the Treasury Department on the

application form, by e-mail on the e-mail addresses prescribed on the

application form, or by such other means as may be determined by the

Accountant General.

(3) Unless otherwise notified, each competitive bid must be

made for one amount and at one definite clean price, to be submitted

for €100 nominal and in multiples of one Euro cent (€0.01), and

quoted to two (2) decimal places for a nominal amount not below or

above the minimum and maximum (if applicable) amounts and in

round multiples thereof as established in the offering circular.

(4) There is no limit to the number of bids which any one

participant can bid in the auction as long as the total nominal value of

the bids submitted does not exceed the maximum limits which may be

fixed for specific participation levels (auction tiers) in the auction. Bids

at different prices must be made on separate application forms.

(5) The Accountant General shall publish a price guidance in

close proximity to the auction when a fixed rate Malta Government

Stock is launched via auction only.

(6) Bids may be submitted at any time from the opening of the

bidding window, up to the published deadline after which no further

bids can be accepted. Bids (or offers) cannot be amended or

withdrawn after the time announced for the closure of the auction.

(7) After the designated bidding deadline has passed, the

Accountant General shall check whether bidders have adhered to the

terms of prospectus and shall input the bids into his own allocation

systems. The Accountant General reserves the right to reject any

competitive bid or any part of any competitive bid on any grounds

whatsoever. Subject to this, competitive bids shall be ranked in

descending order of price and the Stock shall be allotted to applicants

whose competitive bids are at or above the lowest price at which the

Accountant General decides that any competitive bid should be

accepted (the ‘lowest accepted price’ / ‘cut-off price’).

(8) The bids equal or higher than such cut-off price shall be

satisfied in full, unless the total amount of such bids exceeds the

amount which the Accountant General has decided to issue. In the

latter case, bids higher than the cut-off price shall be accepted in full

whilst bids at the lowest accepted price (cut-off price) shall be

allotted as far as practicable on a pro rata basis in order to bring the

total allocations in line with the amount to be issued as decided by the

Accountant General.

(9) The pro rata shall be worked out in relation to the residual

nominal amount available for allotment at the cut-off price and the

amount of each tendered bid at the cut-off price, rounded down to the

nearest €1,000, such that allocations on a pro rata basis are in

multiples of €1,000 nominal of Malta Government Stock. The bidder

shall accept any portion of the sum allotted at the same price as that

tendered for the whole amount.

(10) Malta Government Stocks auctions shall normally settle on

the second business day after the auction, in accordance with the T+2

convention. All successful bidders are expected to match the

Accountant General’s settlement instructions as specified on the

acceptance form, and to meet their commitments by matching the

consideration amount to the nearest Euro cent on the day and in good

time as specified on the application form or acceptance form.

(11) The Accountant General shall not be bound to accept any

successful offer unless payment in respect of the offer is made on the

time specified on the application form or acceptance form.

(12) The auction results shall be published by a press release

and on the Treasury’s website as soon as reasonably practicable once

all the necessary calculations, allocations and checks have been

performed internally by the Public Debt Management Directorate.

(13) The published results of the auction shall include details of

the auction highest, average and lowest accepted prices, the gross

redemption yields equivalent to these prices; they shall also include

the total nominal value of all bids received, including those rejected

in whole or in part on account of price, and the ratio of the total value

of bids received to the amount on offer (the ‘cover ratio’).

(14) The Accountant General reserves the right not to allot all

of the Malta Government Stock(s) on offer at an auction if he judges

bids to be at an unacceptably deep discount to the prevailing market

level and therefore not at fair value.

In connection with sub articles 9 (7) and 10 (14), the

Accountant General reserves the right to issue less than the amount on

issue for each Malta Government Stock issuance.

In circumstances where the Accountant General judges

there is demand in a particular Malta Government Stock or in an

attempt to maintain a supply of current benchmark or to increase

depth and liquidity of a stock in the secondary market, he may offer

incremental amounts of that Malta Government Stock to the market

either via auction only or through a combined issuance.

(1)

In terms of articles 33 and 34 of the Act, on the Switch auctions,

Minister’s authorisation, the Accountant General shall make such reverse

and conversions.

arrangements as may be necessary to buyback existing stock or create

and issue such amount of Malta Government Stock(s) issued under

these regulations in exchange for an existing stock(s) for the purpose

of

(a)

conducting buyback operations; or

(b)

redeeming Malta Government Stock(s) earlier than

the established maturity date in full or in part by exchanging an

existing stock(s) subject to any contrary provisions in the

respective prospectus.

(2) To this effect, the Accountant General may at his

discretion use forms of auctions such as switch auctions and reverse

auctions and conversions on fixed price terms. Plans to use these debt

management tools are likely to be set out in, or in conjunction with,

the annual issuance plans or its updates and are carried out under the

provisions of article 32 of the Act.

(3) Switch auctions are designed to allow the exchange

(switching) at market prices of a proportion of one or more Malta

Government Stock(s) (source Stock) normally near maturity for

another new or fungible Stock(s) engaging a process whereby an

amount of the source Stock(s) is retired and cancelled and an

additional amount of the destination Stock(s) is created. Under this

operation the Accountant General makes an offer to exchange a pre-

announced amount of one or more Stocks with one or more Malta

Government Stock(s).

(4) Switch auctions and conversions may be employed to

pursue a wide variety of objectives, including

(a)

to enable decreasing the refinancing and interest

rate risk;

(b)

to allow the Treasury to smooth the Malta

Government Stock redemption profile;

(c)

to maintain a supply of benchmark Malta

Government Stock in a low issuance environment;

(d)

to enhance liquidity; and

(e)

to offer an opportunity to investors to restructure

their portfolio in an efficient manner.

(5) The bidding mechanics of a switch auction are similar to

those of regular auctions, inter alia in terms of issuance

announcements, bid denominations and publication of results.

(6) The Treasury shall fix the clean price of the source Stock

in close proximity of the bidding deadline. The bidders shall submit

their bids in terms of the nominal amount of the source Malta

Government Stock which they are willing to exchange and the clean

Government Stock.

(7) Switch auctions are cash neutral operations, hence

successful bidders shall be allocated nominal amounts of the

destination stock calculated as the ratio of the dirty prices of the two

Malta Government Stocks (source and destination), as stipulated in

the offering circular.

(8) Before accepting any bids, the Accountant General shall

take into account the fair value in the market and shall reserve the

right to reject any bids which he judges to be at an excessive discount.

The Accountant General reserves the right to exchange less than the

amount on issue of Malta Government Stock offered for exchange in

any auction as well as disallow any application or part thereof for any

reason whatsoever.

(9) The published results of a switch auction shall include,

where applicable

(a)

details of the highest, average and lowest accepted

prices of the destination stock and the dirty price ratios relating

to these prices;

(b)

the nominal amounts of the source stock offered

and that accepted;

(c)

the nominal quantity of the destination stock newly

created;

(d)

the new amounts outstanding of the source and

destination stock following the allocation and the ratio of bids

received to the amount on offer (the ‘cover ratio’).

(10) Reverse auction is designed to allow the Accountant

General to buy-in rather than sell Malta Government Stocks. Under

this operation the Accountant General shall make an offer to buy back

pre-announced amounts of one or more Malta Government Stocks

which are then subsequently cancelled.

(11) The mechanics of a reverse auction are similar to those of

regular auctions, in terms of, inter alia, announcements of the

issuance, denominations of the bids and results. Reverse auctions are

held and offered on a competitive multiple price basis where bidders

submit offers to sell a Malta Government Stock to the Treasury. The

competitive offers are accepted in ascending order in terms of price

and the stocks will be purchased from bidders whose bids are at or

below the highest price accepted at which the Accountant General

decides that any competitive bid should be accepted. As with regular

auctions, before accepting any offers, the Accountant General shall be

mindful of fair value in the market, and shall reserve the right to

reject any offers which he judges to be at an excessive premium.

(12) Occasionally, the Accountant General may announce a

conversion offer at fixed price terms targeted at retail investors.

Conversion offers are designed to allow the exchange (conversion) of a

proportion or the full amount of Malta Government Stock (source

Stock) normally on maturity or near maturity for another new or

fungible Stock engaging a process whereby an amount or the full

amount of the source Stock is retired and cancelled, and an additional

amount of the destination stock is created. Under this operation, the

Accountant General makes an offer to exchange a pre-announced

amount of one Stock with another Malta Government Stock(s) at a pre-

announced fixed price. Existing holders have until the pre-announced

prescribed time on the closing date to notify the Accountant General of

their intention to assent to the conversion. Notice of assent once given

is irrevocable after the closing date and time.

(1)

It is the responsibility of each buyer of Stock to Responsibility

ensure compliance with all legal and regulatory restrictions and for compliance.

obligations applicable to it in all relevant jurisdictions in relation to

its initial purchase and any onward sale or transfer by it of such Stock.

(2) It is the sole responsibility of the buyers purchasing Stock

on behalf of a client to conduct appropriate due diligence validations

on the client and to be responsible for the legal and regulatory

compliance of each transaction they enter into with the client.

(1)

The Accountant General and any person acting Indemnity of

under his authority shall not be liable in respect of any payment or act Government

officers.

duly made in accordance with the provisions of these regulations and

any such payment shall, subject to the provisions of these regulations

concerning the rights of third parties, be deemed to have been a valid

payment, and the receipt by the person or persons to whom the money

was paid shall be a full discharge to the Accountant General for such

payment.

(2) Where any payment in respect of Malta Government Stock

is issued to any person or persons who is/are neither the holder/s nor a

person/s otherwise entitled by or under these regulations to receive

such payment, then if it is shown that

(a)

the payment was issued in good faith and without

negligence; and

(b)

the issue of the payment to that person/s is

attributable to some act or omission on the part of the holder/s

or of the person/s otherwise entitled to receive payment;

the payment shall, saving the provisions of these regulations

concerning the rights of third parties, be deemed to have been duly

issued to the holder or the person entitled to receive payment.

(3) The Accountant General shall not be liable for any delay in

the completion of any payment if the delay is outside the direct

control of the Treasury Department.

Nothing contained in regulation 15(1) and (2) for the

protection of the Accountant General shall operate to prevent the

recovery by any holder/s or his/their representative/s or his/their

beneficiaries of any money lawfully due to the holder/s from the

person/s to whom that money was paid by the Accountant General or

under his direction or affect the rights of any holder/s or his/their

representative/s or his/their beneficiaries may have in respect of

Malta Government Stocks against a third party.

(1)

Stockholders shall not be entitled to claim interest

on any Malta Government Stocks issued under these regulations in

respect of any period which has elapsed after the earliest date on

which the demand could lawfully have been made for the payment of

the principal amount due.

(2) Where an amount has become payable on the Malta

Government Stocks as interest due, no interest on that amount shall,

after that date, be paid or payable by the Government to any

stockholder in any circumstances.

(1)

Transactions related to the transfer causa mortis of

Malta Government Stocks onto the beneficiaries of the deceased

holder shall be processed by the Accountant General or any person

appointed by him to deal with the processing and vetting of

documentation leading to the release and transfer of Malta

Government Stocks.

(2) The Accountant General or the person appointed by him to

deal with the claims relating to the transfer causa mortis shall process

the release and transfer of the Malta Government Stocks in

accordance with the holder’s testamentary disposition and on the

instructions submitted by the notary or lawyer having the lawful

authority to act on behalf of the heirs.

Claims in respect of Malta Government Stocks issued Prescription.

under these regulations shall become prescribed unless presented for

payment within six years from the maturity date of the Malta

Government Stocks.

The posting of letters and documentation issued to the Posting to be

stockholders of Malta Government Stocks at the last address regarded

delivery.

registered in the Register shall, as with regard to the liability of the

Accountant General, be equivalent to the delivery of the letter or

documentation to that stockholder.

€1.53