MAR Market Conduct

Part

MAR Market Conduct

Printed on: 12/12/2024

Rulebook at: 06/06/2008

Chapters

MAR 1 The Code of Market Conduct
MAR 2 Stabilisation
MAR 4 Endorsement of the Takeover Code
MAR 5 Multilateral trading facilities (MTFs)
MAR 6 Systematic Internalisers
MAR 7 Disclosure of information on certain trades undertaken outside a regulated market or MTF
Transitional Provisions and Schedules

MAR 1

The Code of Market Conduct

MAR 1.1

Application and interpretation

01/07/2005

MAR 1.1.1

This chapter (which contains the Code of Market Conduct) applies to all persons seeking guidance on the market abuse regime.

01/07/2005

MAR 1.1.2

This chapter provides assistance in determining whether or not behaviour amounts to market abuse. It also forms part of the UK's implementation of the Market Abuse Directive (including its EU implementing legislation, that is Directive 2003/124/EC, Directive 2003/125/EC, Regulation 2273/2003 and Directive 2004/72/EC). It is therefore likely to be helpful to persons who:

(1) want to avoid engaging in market abuse or to avoid requiring or encouraging another to do so; or
(2) want to determine whether they are required by SUP 15.10 (Reporting suspicious transactions (market abuse)) to report a transaction to the FSA as a suspicious one.

01/07/2005

MAR 1.1.3

The FSA's statement of policy about the imposition and amount of penalties in cases of market abuse (required by section 124 of the Act) is in DEPP 6.

28/08/2007

Using MAR 1

MAR 1.1.4

(1) Assistance in the interpretation of MAR 1 (and the remainder of the Handbook) is given in the Readers' Guide to the Handbook and in GEN 2 (Interpreting the Handbook). This includes an explanation of the status of the types of provision used (see in particular chapter six of the Readers' Guide to the Handbook).
(2) Provisions designated with "C" indicate behaviour which conclusively, for the purposes of the Act, does not amount to market abuse (see section 122(1) of the Act).

01/07/2005

MAR 1.1.5

Part VIII of the Act, and in particular section 118, specifies seven types of behaviour which can amount to market abuse. This chapter considers the general concepts relevant to market abuse, then each type of behaviour in turn and then describes exceptions to market abuse which are of general application. In doing so, it sets out the relevant provisions of the Code of Market Conduct, that is:

(1) descriptions of behaviour that, in the opinion of the FSA, do or do not amount to market abuse (see section 119(2)(a) and (b) and section 122 of the Act);
(2) descriptions of behaviour that are or are not accepted market practices in relation to one or more identified markets (see section 119(2)(d) and (e) and section 122(1) of the Act (subject to the behaviour being for legitimate reasons)); and
(3) factors that, in the opinion of the FSA, are to be taken into account in determining whether or not behaviour amounts to market abuse (see section 119(2)(c) and section 122(2) of the Act).

01/07/2005

MAR 1.1.6

The Code does not exhaustively describe all types of behaviour that may or may not amount to market abuse. In particular, the descriptions of behaviour which, in the opinion of the FSA, amount to market abuse should be read in the light of:

(1) the elements specified by the Act as making up the relevant type of market abuse; and
(2) any relevant descriptions of behaviour which, in the opinion of the FSA, do not amount to market abuse.

01/07/2005

MAR 1.1.7

Likewise, the Code does not exhaustively describe all the factors to be taken into account in determining whether behaviour amounts to market abuse. If factors are described, they are not to be taken as conclusive indications, unless specified as such, and the absence of a factor mentioned does not, of itself, amount to a contrary indication.

01/07/2005

MAR 1.1.8

For the avoidance of doubt, it should be noted that any reference in the Code to "profit" refers also to potential profits, avoidance of loss or potential avoidance of loss.

01/07/2005

MAR 1.2

Market Abuse: general

01/07/2005

MAR 1.2.1

Provisions in this section are relevant to more than one of the types of behaviour which may amount to market abuse.

01/07/2005

MAR 1.2.2

Table: section 118(1) of the Act

"For the purposes of this Act, [market abuse] is [behaviour] (whether by one person alone or by two or more persons jointly or in concert) which -

(a)

occurs in relation to:

(i)

[qualifying investments] admitted to trading on a [prescribed market], or

(ii)

[qualifying investments] in respect of which a request for admission to trading on such a market has been made, or

(iii)

in the case of subsections (2) and (3), investments which are [related investments] in relation to such [qualifying investments], and

(b)

falls within any one or more of the types of [behaviour] set out in subsections (2) to (8).

01/07/2005

MAR 1.2.3

Section 118(1)(a) of the Act does not require the person engaging in the behaviour in question to have intended to commit market abuse.

01/07/2005

MAR 1.2.4

Statements in this chapter to the effect that behaviour will amount to market abuse assume that the test in section 118(1)(a) of the Act has also been met.

01/07/2005

Prescribed markets and qualifying investments: "in relation to": factors to be taken into account

MAR 1.2.5

In the opinion of the FSA, the following factors are to be taken into account in determining whether or not behaviour prior to a request for admission to trading or the admission to or the commencement of trading satisfies section 118(1)(a) of the Act, and are indications that it does:

(1) if it is in relation to qualifying investments in respect of which a request for admission to trading on a prescribed market is subsequently made; and
(2) if it continues to have an effect once an application has been made for the qualifying investment to be admitted for trading, or it has been admitted to trading on a prescribed market, respectively.

01/07/2005

MAR 1.2.6

In the opinion of the FSA, the following factors are to be taken into account in determining whether or not refraining from action amounts to behaviour which satisfies section 118(1)(a) of the Act and are indications that it does:

(1) if the person concerned has failed to discharge a legal or regulatory obligation (for example to make a particular disclosure) by refraining from acting; or
(2) if the person concerned has created a reasonable expectation of him acting in a particular manner, as a result of his representations (by word or conduct), in circumstances which give rise to a duty or obligation to inform those to whom he made the representations that they have ceased to be correct, and he has not done so.

01/07/2005

Insiders: factors to be taken into account

MAR 1.2.7

Table: section 118B of the Act

"For the purposes of [market abuse] an [insider] is any person who has [inside information] -

(a)

as a result of his membership of the administrative, management or supervisory bodies of an [issuer] of [qualifying investments],

(b)

as a result of his holding in the capital of an [issuer] of [qualifying investments],

(c)

as a result of having access to the information through the exercise of his employment, profession or duties,

(d)

as a result of his criminal activities, or

(e)

which he has obtained by other means and which he knows, or could reasonably be expected to know, is [inside information]."

01/07/2005

MAR 1.2.8

In the opinion of the FSA, the following factors are to be taken into account in determining whether or not a person could reasonably be expected to know that information in his possession is inside information and therefore whether he is an insider under section 118B(e) of the Act, and indicate that the person is an insider:

(1) if a normal and reasonable person in the position of the person who has inside information would know or should have known that the person from whom he received it is an insider; and
(2) if a normal and reasonable person in the position of the person who has inside information would know or should have known that it is inside information.

01/07/2005

MAR 1.2.9

For the purposes of the other categories of insider specified by section 118B(a) to (d), the person concerned does not need to know that the information concerned is inside information.

01/07/2005

Inside information: factors to be taken into account

MAR 1.2.10

Table: section 118C(2) and (3) of the Act

"... [inside information] is information of a precise nature which -

(a)

is not generally available; ..."

01/07/2005

MAR 1.2.11

The phrase "precise nature" is defined in section 118C(5) of the Act. This phrase is also relevant to section 118C(4) of the Act.

01/07/2005

MAR 1.2.12

In the opinion of the FSA, the following factors are to be taken into account in determining whether or not information is generally available, and are indications that it is (and therefore not inside information):

(1) whether the information has been disclosed to a prescribed market through a regulatory information service or RIS or otherwise in accordance with the rules of that market;
(2) whether the information is contained in records which are open to inspection by the public;
(3) whether the information is otherwise generally available, including through the Internet, or some other publication (including if it is only available on payment of a fee), or is derived from information which has been made public;
(4) whether the information can be obtained by observation by members of the public without infringing rights or obligations of privacy, property or confidentiality; and
(5) the extent to which the information can be obtained by analysing or developing other information which is generally available. [Note: Recital 31 Market Abuse Directive]

01/07/2005

MAR 1.2.13

(1) In relation to the factors in MAR 1.2.12E it is not relevant that the information is only generally available outside the UK.
(2) In relation to the factors in MAR 1.2.12E (1), (3), (4) and (5) it is not relevant that the observation or analysis is only achievable by a person with above average financial resources, expertise or competence.

01/07/2005

MAR 1.2.14

For example, if a passenger on a train passing a burning factory calls his broker and tells him to sell shares in the factory's owner, the passenger will be acting on information which is generally available, since it is information which has been obtained by legitimate means through observation of a public event.

01/07/2005

MAR 1.2.15

Table: section 118C(4) of the Act

"In relation to a person charged with the execution of orders ... [inside information] includes information conveyed by a client and related to the client's pending orders ..."

01/07/2005

MAR 1.2.16

In the opinion of the FSA, a factor which indicates that there is a pending order for a client is, if a person is approached by another in relation to a transaction, and:

(1) the transaction is not immediately executed on an arm's length basis in response to a price quoted by that person; and
(2) the person concerned has taken on a legal or regulatory obligation relating to the manner or timing of the execution of the transaction.

01/07/2005

Inside information: commodity derivatives

MAR 1.2.17

The Act (and the Market Abuse Directive) recognise that there are differences in the nature of information which is important to commodity derivatives markets and that which is important to other markets. In particular, inside information is limited by reference to what the market participants expect to receive information about.

01/07/2005

MAR 1.2.18

Table: section 118C(3) of the Act

"In relation to [qualifying investments] or [related investments] which are commodity derivatives, [inside information] is information of a precise nature which ... (c) users of markets in which the derivatives are traded would expect to receive in accordance with any accepted market practices on those markets."

01/07/2005

MAR 1.2.19

Table: section 118C(7) of the Act

"For the purposes of subsection (3)(c), users of markets on which investments in commodity derivatives are traded are to be treated as expecting to receive information ... which is -
(i) routinely made available to the users of those markets, or
(ii) required to be disclosed in accordance with any statutory provision, market rules, or contracts or customs on the relevant underlying commodity market or commodity derivatives market."

01/07/2005

The regular user

MAR 1.2.20

In section 118 of the Act, the regular user decides:

(1) whether information that is not generally available would or would be likely to be relevant when deciding the terms on which transactions in qualifying investments or related investments should be effected (section 118(4)(a) of the Act); and
(2) whether behaviour:

(a) based on information meeting the criteria in section 118(4)(a) is below the expected standard (section 118(4)(b)); or
(b) creates or is likely to create a false or misleading impression or distorts the market or (section 118(8)); or
(c) which creates or is likely to create a false or misleading impression or distorts the market is below the expected standard (section 118(8)).

01/07/2005

MAR 1.2.21

The regular user is a hypothetical reasonable person who regularly deals on the market and in the investments of the kind in question. The presence of the regular user imports an objective element into the elements listed in MAR 1.2.15 UK while retaining some subjective features of the markets for the investments in question.

01/07/2005

Requiring or encouraging

MAR 1.2.22

Table: section 123(1)(b) of the Act

"If [the FSA ] is satisfied that a person ("A") - ...

(b) by taking or refraining from taking any action has required or encouraged another person or persons to engage in [behaviour], which if engaged in by A, would amount to [market abuse],

it may impose on him a penalty of such amount as it considers appropriate.

01/07/2005

MAR 1.2.23

The following are examples of behaviour that might fall within the scope of section 123(1)(b):

(1) a director of a company, while in possession of inside information, instructs an employee of that company to deal in qualifying investments or related investments in respect of which the information is inside information;
(2) a person recommends or advises a friend to engage in behaviour which, if he himself engaged in it, would amount to market abuse.

01/07/2005

MAR 1.3

Market abuse (insider dealing)

01/07/2005

MAR 1.3.1

Table: section 118(2) of the Act

"The first type of [behaviour] is where

an [insider]

[deals], or attempts to [deal],

in a [qualifying investment] or [related investment]

on the basis of

[inside information]

relating to the investment in question."

01/07/2005

Descriptions of behaviour that amount to market abuse (insider dealing)

MAR 1.3.2

The following behaviours are, in the opinion of the FSA, market abuse (insider dealing):

(1) dealing on the basis of inside information which is not trading information;
(2) front running/pre-positioning - that is, a transaction for a person's own benefit, on the basis of and ahead of an order which he is to carry out with or for another (in respect of which information concerning the order is inside information), which takes advantage of the anticipated impact of the order on the market price;
(3) in the context of a takeover, an offeror or potential offeror entering into a transaction in a qualifying investment, on the basis of inside information concerning the proposed bid, that provides merely an economic exposure to movements in the price of the target company's shares (for example, a spread bet on the target company's share price); and
(4) in the context of a takeover, a person who acts for the offeror or potential offeror dealing for his own benefit in a qualifying investment or related investments on the basis of information concerning the proposed bid which is inside information.

01/07/2005

Factors to be taken into account: "on the basis of"

MAR 1.3.3

In the opinion of the FSA, the following factors are to be taken into account in determining whether or not a person's behaviour is "on the basis of" inside information, and are each indications that it is not:

(1) if the decision to deal or attempt to deal was made before the person possessed the relevant inside information; or
(2) if the person concerned is dealing to satisfy a legal or regulatory obligation which came into being before he possessed the relevant inside information; or
(3) if a person is an organisation, if none of the individuals in possession of the inside information:

(a) had any involvement in the decision to deal; or
(b) behaved in such a way as to influence, directly or indirectly, the decision to engage in the dealing; or
(c) had any contact with those who were involved in the decision to engage in the dealing whereby the information could have been transmitted.

01/07/2005

MAR 1.3.4

In the opinion of the FSA, if the inside information is the reason for, or a material influence on, the decision to deal or attempt to deal, that indicates that the person's behaviour is "on the basis of" inside information.

01/07/2005

MAR 1.3.5

In the opinion of the FSA, if the inside information is held behind an effective Chinese wall, or similarly effective arrangements, from the individuals who are involved in or who influence the decision to deal, that indicates that the decision to deal by an organisation is not "on the basis of" inside information.

01/07/2005

Descriptions of behaviour that do not amount to market abuse (insider dealing) and relevant factors: legitimate business of market makers etc:

MAR 1.3.6

A person will form an intention to buy or sell a qualifying investment or a related investment before doing so. His carrying out of his own intention is not in itself market abuse (insider dealing). [Note: Recital 30 Market Abuse Directive]

01/07/2005

MAR 1.3.7

For market makers and persons that may lawfully deal in qualifying investments or related investments on their own account, pursuing their legitimate business of such dealing (including entering into an agreement for the underwriting of an issue of financial instruments) will not in itself amount to market abuse (insider dealing). [Note: Recital 18 Market Abuse Directive]

01/07/2005

MAR 1.3.8

MAR 1.3.7 C applies even if the person concerned in fact possesses trading information which is inside information.

01/07/2005

MAR 1.3.9

In the opinion of the FSA, if the inside information is not limited to trading information, (except in relation to an agreement for the underwriting of an issue of financial instruments) that indicates that the behaviour is not in pursuit of legitimate business.

01/07/2005

MAR 1.3.10

In the opinion of the FSA, the following factors are to be taken into account in determining whether or not a person's behaviour is in pursuit of legitimate business, and are indications that it is:

(1) the extent to which the relevant trading by the person is carried out in order to hedge a risk, and in particular the extent to which it neutralises and responds to a risk arising out of the person's legitimate business; or
(2) whether, in the case of a transaction on the basis of inside information about a client's transaction which has been executed, the reason for it being inside information is that information about the transaction is not, or is not yet, required to be published under any relevant regulatory or exchange obligations; or
(3) whether, if the relevant trading by that person is connected with a transaction entered into or to be entered into with a client (including a potential client), the trading either has no impact on the price or there has been adequate disclosure to that client that trading will take place and he has not objected to it; or
(4) the extent to which the person's behaviour was reasonable by the proper standards of conduct of the market concerned, taking into account any relevant regulatory or legal obligations and whether the transaction is executed in a way which takes into account the need for the market as a whole to operate fairly and efficiently.

01/07/2005

MAR 1.3.11

In the opinion of the FSA, if the person acted in contravention of a relevant legal, regulatory or exchange obligation, that is a factor to be taken into account in determining whether or not a person's behaviour is in pursuit of legitimate business, and is an indication that it is not.

01/07/2005

Descriptions of behaviour that do not amount to market abuse (insider dealing) and relevant factors: execution of client orders

MAR 1.3.12

The dutiful carrying out of, or arranging for the dutiful carrying out of, an order on behalf of another (including as portfolio manager) will not in itself amount to market abuse (insider dealing) by the person carrying out that order. [Note: Recital 18 Market Abuse Directive]

01/07/2005

MAR 1.3.13

MAR 1.3.12 C applies whether or not the person carrying out the order or the person for whom he is acting in fact possesses inside information. Also, a person that carries out an order on behalf of another will not, merely as a result of that action, be considered to have any inside information held by that other person.

01/07/2005

MAR 1.3.14

In the opinion of the FSA, if the inside information is not limited to trading information, that indicates that the behaviour is not dutiful carrying out of an order on behalf of a client.

01/07/2005

MAR 1.3.15

In the opinion of the FSA, the following factors are to be taken into account in determining whether or not a person's behaviour is dutiful execution of an order on behalf of another, and are indications that it is:

(1) whether the person has complied with the applicable provisions of COBS , or their equivalents in the relevant jurisdiction; or
(2) whether the person has agreed with its client it will act in a particular way when carrying out, or arranging the carrying out of, the order; or
(3) whether the person's behaviour was with a view to facilitating or ensuring the effective carrying out of the order; or
(4) the extent to which the person's behaviour was reasonable by the proper standards of conduct of the market concerned and (if relevant) proportional to the risk undertaken by him; or
(5) whether, if the relevant trading by that person is connected with a transaction entered into or to be entered into with a client (including a potential client), the trading either has no impact on the price or there has been adequate disclosure to that client that trading will take place and he has not objected to it.

01/11/2007

MAR 1.3.16

Some steps which a person takes as a result of carrying out a client transaction may be within the scope of MAR 1.3.6 C to MAR 1.3.11 E rather than being part of dutiful execution.

01/07/2005

Descriptions of behaviour that do not amount to market abuse (insider dealing) and relevant factors: takeover and merger activity

MAR 1.3.17

Behaviour, based on inside information relating to another company, in the context of a public takeover bid or merger for the purpose of gaining control of that company or proposing a merger with that company, does not of itself amount to market abuse (insider dealing) [Note: see Recital 29 Market Abuse Directive], including:

(1) seeking from holders of securities, issued by the target, irrevocable undertakings or expressions of support to accept an offer to acquire those securities (or not to accept such an offer);
(2) making arrangements in connection with an issue of securities that are to be offered as consideration for the takeover or merger offer or to be issued in order to fund the takeover or merger offer, including making arrangements for the underwriting or placing of those securities and any associated hedging arrangements by underwriters or places which are proportionate to the risks assumed; and
(3) making arrangements to offer cash as consideration for the takeover or merger offer as an alternative to securities consideration.

01/07/2005

MAR 1.3.18

There are two categories of inside information relevant to MAR 1.3.17 C:

(1) information that an offeror or potential offeror is going to make, or is considering making, an offer for the target;
(2) information that an offeror or potential offeror may obtain through due diligence.

01/07/2005

MAR 1.3.19

In the opinion of the FSA, the following factors are to be taken into account in determining whether or not a person's behaviour is for the purpose of him gaining control of the target company or him proposing a merger with that company, and are indications that it is:

(1) whether the transactions concerned are in the target company's shares; or
(2) whether the transactions concerned are for the sole purpose of gaining that control or effecting that merger.

01/07/2005

Examples of market abuse (insider dealing)

MAR 1.3.20

The following examples of market abuse (insider dealing) concern the definition of inside information relating to financial instruments other than commodity derivatives.

(1) X, a director at B PLC has lunch with a friend, Y. X tells Y that his company has received a takeover offer that is at a premium to the current share price at which it is trading. Y enters into a spread bet priced or valued by reference to the share price of B PLC based on his expectation that the price in B PLC will increase once the take over offer is announced.
(2) An employee at B PLC obtains the information that B PLC has just lost a significant contract with its main customer. Before the information is announced over the regulatory information service the employee, whilst being under no obligation to do so, sells his shares in B PLC based on the information about the loss of the contract.

01/07/2005

MAR 1.3.21

The following example of market abuse (insider dealing) concerns the definition of inside information relating to commodity derivatives.
Before the official publication of LME stock levels, a metals trader learns (from an insider) that there has been a significant decrease in the level of LME aluminium stocks. This information is routinely made available to users of that prescribed market. The trader buys a substantial number of futures in that metal on the LME, based upon his knowledge of the significant decrease in aluminium stock levels.

01/07/2005

MAR 1.3.22

The following example of market abuse (insider dealing) concerns the definition of inside information relating to pending client orders.
A dealer on the trading desk of a firm dealing in oil derivatives accepts a very large order from a client to acquire a long position in oil futures deliverable in a particular month. Before executing the order, the dealer trades for the firm and on his personal account by taking a long position in those oil futures, based on the expectation that he will be able to sell them at profit due to the significant price increase that will result from the execution of his client's order. Both trades will be market abuse (insider dealing).

01/07/2005

MAR 1.3.23

The following connected examples of market abuse (insider dealing) concerns the differences in the definition of inside information for commodity derivatives and for other financial instruments.

(1) A person deals, on a prescribed market, in the equities of XYZ plc, a commodity producer, based on inside information concerning that company.
(2) A person deals, in a commodity futures contract traded on a prescribed market, based on the same information, provided that the information is required to be disclosed under the rules of the relevant commodity futures market.

01/07/2005

MAR 1.4

Market abuse (improper disclosure)

01/07/2005

MAR 1.4.1

Table: section 118(3) of the Act

"The second [type of behaviour] is where:

an [insider]

discloses

[inside information]

to another person

otherwise than in the proper course of the exercise of his employment, profession or duties."

01/07/2005

Descriptions of behaviour that amount to market abuse (improper disclosure)

MAR 1.4.2

The following behaviours are, in the opinion of the FSA, market abuse (improper disclosure):

(1) disclosure of inside information by the director of an issuer to another in a social context; and
(2) selective briefing of analysts by directors of issuers or others who are persons discharging managerial responsibilities.

01/07/2005

Descriptions of behaviour that does not amount to market abuse (improper disclosure)

MAR 1.4.3

Disclosure of inside information will not amount to market abuse (improper disclosure), if it is made:

(1) to a government department, the Bank of England, the Competition Commission, the Takeover Panel or any other regulatory body or authority for the purposes of fulfilling a legal or regulatory obligation; or
(2) otherwise to such a body in connection with the performance of the functions of that body.

01/07/2005

MAR 1.4.4

Disclosure of inside information which is required or permitted by Part 6 rules (or any similar regulatory obligation) will not amount to market abuse (improper disclosure).

01/07/2005

Factors to be taken into account in determining whether or not behaviour amounts to market abuse (improper disclosure)

MAR 1.4.5

In the opinion of the FSA, the following factors are to be taken into account in determining whether or not the disclosure was made by a person in the proper course of the exercise of his employment, profession or duties, and are indications that it was:

(1) whether the disclosure is permitted by the rules of a prescribed market, of the FSA or the Takeover Code; or
(2) whether the disclosure is accompanied by the imposition of confidentiality requirements upon the person to whom the disclosure is made and is:

(a) reasonable and is to enable a person to perform the proper functions of his employment, profession or duties; or
(b) reasonable and is (for example, to a professional adviser) for the purposes of facilitating or seeking or giving advice about a transaction or takeover bid; or
(c) reasonable and is for the purpose of facilitating any commercial, financial or investment transaction (including prospective underwriters or placees of securities); or
(d) reasonable and is for the purpose of obtaining a commitment or expression of support in relation to an offer which is subject to the Takeover Code; or
(e) in fulfilment of a legal obligation, including to employee representatives or trade unions acting on their behalf; or

(3) whether:

(a) the information disclosed is trading information;
(b) the disclosure is made by a person ("A") only to the extent necessary, and solely in order, to offer to dispose of the investment to, or acquire the investment from, the person receiving the information; and
(c) it is reasonable for A to make the disclosure to enable him to perform the proper functions of his employment, profession or duties.

14/12/2007

MAR 1.4.5A

MAR 1.4.5 E (3) is intended only to apply to an actual offer of the investment. It is not intended to apply to a disclosure of trading information to gauge potential interest in the investments to be offered or to help establish the likely price that will be obtained.

14/12/2007

Examples of market abuse (improper disclosure)

MAR 1.4.6

The following is an exampleof market abuse (improper disclosure):
X, a director at B PLC has lunch with a friend, Y, who has no connection with B PLC or its advisers. X tells Y that his company has received a takeover offer that is at a premium to the current share price at which it is trading.

01/07/2005

MAR 1.4.7

The following is an example of encouraging another to engage in market abuse (improper disclosure):
X, an analyst employed by an investment bank, telephones the finance director at B PLC and presses for details of the profit and loss account from the latest unpublished management accounts of B PLC.

01/07/2005

MAR 1.5

Market abuse (misuse of information)

01/07/2005

MAR 1.5.1

Table: section 118(4) of the Act:

"The third [type of behaviour] is where the [behaviour] (not [amounting to market abuse (insider dealing) or market abuse (improper disclosure)])-

(a)

which is not generally available to those using the market

but which, if available to a [regular user] of the market, would be, or would be likely to be, regarded by him as relevant when deciding the terms on which transactions in [qualifying investments] should be effected; and

(b)

is likely to be regarded by a [regular user] of the market as a failure on the part of the person concerned to observe the standard of [behaviour] reasonably expected of a person in his position in relation to the market."

01/07/2005

Descriptions of behaviour that amount to market abuse (misuse of information)

MAR 1.5.2

The following behaviours are, in the opinion of the FSA, market abuse (misuse of information):

(1) dealing or arranging deals in qualifying investments based on relevant information, which is not generally available and relates to matters which a regular user would reasonably expect to be disclosed to users of the particular prescribed market, but which does not amount to market abuse (insider dealing) (whether because the dealing relates to a qualifying investment to which section 118(2) does not apply or because the relevant information is not inside information); and
(2) a director giving relevant information, which is not generally available and relates to matters which a regular user would reasonably expect to be disclosed to users of the particular prescribed market, to another otherwise than in the proper course of the exercise of his employment or duties, in a way which does not amount to market abuse (improper disclosure) (whether because the relevant information is not inside information or for some other reason).

01/07/2005

MAR 1.5.3

The following behaviours are, in the opinion of the FSA, capable of amounting to market abuse (misuse of information):

(1) dealing in a qualifying investment based on relevant information, which is not generally available and is not inside information;
(2) behaviour, other than dealing in a qualifying investment or a related investment, that is based on relevant information which is not generally available and is not inside information; and
(3) entering into a transaction, which is not a qualifying investment or a related investment, based on relevant information which is not generally available and is not inside information.

01/07/2005

Factors to be taken into account: "generally available"

MAR 1.5.4

The factors taken into account in deciding whether or not information is generally available for the purposes of the definition of inside information (see MAR 1.2.12 E - MAR 1.2.13 E) will also be relevant when considering whether or not behaviour amounts to market abuse (misuse of information).

01/07/2005

Factors to be taken into account: "based on"

MAR 1.5.5

The factors taken into account in deciding whether or not a person's behaviour is "on the basis of" inside information (see MAR 1.3.3 E - MAR 1.3.5 E) will also be relevant when considering whether or not behaviour is "based on" relevant information which is not generally available to those using the market.

01/07/2005

Factors to be taken into account: "relevant information"

MAR 1.5.6

In the opinion of the FSA, the following factors are to be taken into account in determining whether or not a regular user would regard information as relevant information, and are indications that he would:

(1) the extent to which the information is reliable, including how near the person providing the information is, or appears to be, to the original source of that information and the reliability of that source; or
(2) if the information differs from information which is generally available and can therefore be said to be new or fresh information; or
(3) in the case of information relating to possible future developments which are not currently required to be disclosed but which, if they occur, will lead to a disclosure or announcement being made whether the information provides, with reasonable certainty, grounds to conclude that the possible future developments will, in fact, occur; or
(4) if there is no other material information which is already generally available to inform users of the market.

01/07/2005

Factors to be taken into account: standards of behaviour

MAR 1.5.7

In the opinion of the FSA , the following factors are to be taken into account when considering whether a regular user would reasonably expect the relevant information to be disclosed to users of the particular prescribed market, or to be announced, and accordingly whether behaviour is likely to be regarded by a regular user as failing to meet the expected standard and are indications that he would:

(1) if the relevant information has to be disclosed in accordance with any legal or regulatory requirement, such as:

(a) information which is required to be disseminated under the Takeover Code (or itsequivalent in the relevant jurisdiction) on, or in relation to, qualifying investments; or
(b) information which is required to be disseminated under the Part 6 rules (or their equivalents in the relevant jurisdiction); or
(c) information required to be disclosed by an issuer under the laws, rules or regulations applying to the prescribed market on which its issued qualifying investments are traded or admitted to trading; or

(2) if the relevant information is routinely the subject of a public announcement although not subject to any formal disclosure requirement, such as:

(a) information which is to be the subject of official announcement by governments, central monetary or fiscal authorities or a regulatory body (financial or otherwise, including exchanges); or
(b) changes to published credit ratings of issuers of qualifying investments; or
(c) changes to the constituents of a securities index, where the securities are qualifying investments; or

(3) if behaviour is based on information relating to possible future developments, if it is reasonable to believe that the information in question will subsequently become of a type within (1) or (2).

06/02/2007

Descriptions of behaviour that does not amount to market abuse (misuse of information)

MAR 1.5.8

Behaviour falling within the description of behaviour which amounts to market abuse (insider dealing) or market abuse (improper disclosure) is not market abuse (misuse of information).

01/07/2005

MAR 1.5.9

Behaviour falling within the descriptions of behaviour that do not amount to market abuse (insider dealing) (MAR 1.3.6 C, MAR 1.3.7 C, MAR 1.3.12 C and MAR 1.3.17 C), or that would fall within those descriptions, if the references in those descriptions to inside information included a reference to relevant information, also do not amount to market abuse (misuse of information).

01/07/2005

Examples of market abuse (misuse of information)

MAR 1.5.10

The following behaviour may amount to market abuse (misuse of information):

(1) X, a director at B PLC, has lunch with a friend, Y. X tells Y that his company has received a takeover offer. Y places a fixed odds bet with a bookmaker that B PLC will be the subject of a bid within a week, based on his expectation that the take over offer will be announced over the next few days.
(2) Informal, non-contractual icing of qualifying investments by the manager of a proposed issue of convertible or exchangeable bonds, which are to be the subject of a public marketing effort, with a view to subsequent borrowing by it of those qualifying investments based on relevant information about the forthcoming issue:

(a) which is not generally available; and
(b) which a regular user would reasonably expect to be disclosed to users of the relevant prescribed market;

where this has the effect of withdrawing those qualifying investments from the lending market in order to lend it to the issue manager in such a way that other market participants are disadvantaged.
(3) An employee of B PLC is aware of contractual negotiations between B PLC and a customer. Transactions with that customer have generated over 10% of B PLC's turnover in each of the last five financial years. The employee knows that the customer has threatened to take its business elsewhere, and that the negotiations, while ongoing, are not proceeding well. The employee, whilst being under no obligation to do so, sells his shares in B PLC based on his assessment that it is reasonably likely that the customer will take his business elsewhere.

01/07/2005

MAR 1.6

Market abuse (manipulating transactions)

01/07/2005

MAR 1.6.1

Table: section 118(5) of the Act

"The fourth [type of behaviour] ... consists of effecting transactions or orders to trade

(otherwise than for legitimate reasons and in conformity with [accepted market practices] on the relevant market)

which -

(a)

give, or are likely to give a false or misleading impression as to the supply of, or demand for, or as to the price of one or more [qualifying investments] or

(b)

secure the price of one or more such investments at an abnormal or artificial level."

01/07/2005

Descriptions of behaviour that amount to market abuse (manipulating transactions): false or misleading impressions

MAR 1.6.2

The following behaviours are, in the opinion of the FSA, market abuse (manipulating transactions) of a type involving false or misleading impressions:

(1) buying or selling qualifying investments at the close of the market with the effect of misleading investors who act on the basis of closing prices, other than for legitimate reasons; [Note: Article 1.2(c) Market Abuse Directive]
(2) wash trades - that is, a sale or purchase of a qualifying investment where there is no change in beneficial interest or market risk, or where the transfer of beneficial interest or market risk is only between parties acting in concert or collusion, other than for legitimate reasons;
(3) painting the tape - that is, entering into a series of transactions that are shown on a public display for the purpose of giving the impression of activity or price movement in a qualifying investment; and
(4) entering orders into an electronic trading system, at prices which are higher than the previous bid or lower than the previous offer, and withdrawing them before they are executed, in order to give a misleading impression that there is demand for or supply of the qualifying investment at that price.

01/07/2005

MAR 1.6.3

For the avoidance of doubt a stock lending/borrowing or repo/reverse repo transaction, or another transaction involving the provision of collateral, do not constitute a wash trade under MAR 1.6.2E (2).

01/07/2005

Descriptions of behaviour that amount to market abuse (manipulating transactions): price positioning

MAR 1.6.4

The following behaviours are, in the opinion of the FSA, market abuse (manipulating transactions) involving securing the price of a qualifying investment:

(1) transactions or orders to trade by a person, or persons acting in collusion, that secure a dominant position over the supply of or demand for a qualifying investment and which have the effect of fixing, directly or indirectly, purchase or sale prices or creating other unfair trading conditions, other than for legitimate reasons; [Note: Article 1.2(c) Market Abuse Directive]
(2) transactions where both buy and sell orders are entered at, or nearly at, the same time, with the same price and quantity by the same party, or different but colluding parties, other than for legitimate reasons, unless the transactions are legitimate trades carried out in accordance with the rules of the relevant trading platform (such as crossing trades);
(3) entering small orders into an electronic trading system, at prices which are higher than the previous bid or lower than the previous offer, in order to move the price of the qualifying investment, other than for legitimate reasons;
(4) an abusive squeeze - that is, a situation in which a person:

(a) has a significant influence over the supply of, or demand for, or delivery mechanisms for a qualifying investment or related investment or the underlying product of a derivative contract;
(b) has a position (directly or indirectly) in an investment under which quantities of the qualifying investment, related investment, or product in question are deliverable; and
(c) engages in behaviour with the purpose of positioning at a distorted level the price at which others have to deliver, take delivery or defer delivery to satisfy their obligations in relation to a qualifying investment (the purpose need not be the sole purpose of entering into the transaction or transactions, but must be an actuating purpose);

(5) parties, who have been allocated qualifying investments in a primary offering, colluding to purchase further tranches of those qualifying investments when trading begins, in order to force the price of the qualifying investments to an artificial level and generate interest from other investors, and then sell the qualifying investments;
(6) transactions or orders to trade employed so as to create obstacles to the price falling below a certain level, in order to avoid negative consequences for the issuer, for example a downgrading of its credit rating; and
(7) trading on one market or trading platform with a view to improperly influencing the price of the same or a related qualifying investment that is traded on another prescribed market.

01/07/2005

Factors to be taken into account: "legitimate reasons"

MAR 1.6.5

In the opinion of the FSA the following factors are to be taken into account when considering whether behaviour is for "legitimate reasons", and are indications that it is not:

(1) if the person has an actuating purpose behind the transaction to induce others to trade in, or to position or move the price of, a qualifying investment;
(2) if the person has another, illegitimate, reason behind the transactions or order to trade; [Note: Recital 20 Market Abuse Directive]
(3) if the transaction was executed in a particular way with the purpose of creating a false or misleading impression.

01/07/2005

MAR 1.6.6

In the opinion of the FSA the following factors are to be taken into account when considering whether behaviour is for "legitimate reasons", and are indications that it is:

(1) if the transaction is pursuant to a prior legal or regulatory obligation owed to a third party;
(2) if the transaction is executed in a way which takes into account the need for the market as a whole to operate fairly and efficiently;
(3) the extent to which the transaction generally opens a new position, so creating an exposure to market risk, rather than closes out a position and so removes market risk; and
(4) if the transaction complied with the rules of the relevant prescribed markets about how transactions are to be executed in a proper way (for example, rules on reporting and executing cross-transactions).

01/07/2005

MAR 1.6.7

It is unlikely that the behaviour of market users when trading at times and in sizes most beneficial to them (whether for the purpose of long term investment objectives, risk management or short term speculation) and seeking the maximum profit from their dealings will of itself amount to distortion. Such behaviour, generally speaking, improves the liquidity and efficiency of markets.

01/07/2005

MAR 1.6.8

It is unlikely that prices in the market which are trading outside their normal range will necessarily be indicative that someone has engaged in behaviour with the purpose of positioning prices at a distorted level. High or low prices relative to a trading range can be the result of the proper interplay of supply and demand.

01/07/2005

Factors to be taken into account: behaviour giving a false or misleading impression

MAR 1.6.9

In the opinion of the FSA, the following factors are to be taken into account in determining whether or not a person's behaviour amounts to market abuse (manipulating transactions): [Note: Article 4 2003/124/EC]

(1) the extent to which orders to trade given or transactions undertaken represent a significant proportion of the daily volume of transactions in the relevant qualifying investment on the regulated market concerned, in particular when these activities lead to a significant change in the price of the qualifying investment;
(2) the extent to which orders to trade given or transactions undertaken by persons with a significant buying or selling position in a qualifying investment lead to significant changes in the price of the qualifying investment or related derivative or underlying asset admitted to trading on a regulated market;
(3) whether transactions undertaken lead to no change in beneficial ownership of a qualifying investment admitted to trading on a regulated market;
(4) 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 qualifying investment on the regulated market concerned, and might be associated with significant changes in the price of a qualifying investment admitted to trading on a regulated market;
(5) 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;
(6) 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
(7) 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.

01/07/2005

Factors to be taken into account: behaviour securing an abnormal or artificial price level

MAR 1.6.10

In the opinion of the FSA, the following factors are to be taken into account in determining whether or not a person's behaviour amounts to market abuse (manipulating transactions):

(1) the extent to which the person had a direct or indirect interest in the price or value of the qualifying investment or related investment;
(2) the extent to which price, rate or option volatility movements, and the volatility of these factors for the investment in question, are outside their normal intra-day, daily, weekly or monthly range; and
(3) whether a person has successively and consistently increased or decreased his bid, offer or the price he has paid for a qualifying investment or related investment.

01/07/2005

Factors to be taken into account: abusive squeezes

MAR 1.6.11

In the opinion of the FSA, the following factors are to be taken into account when determining whether a person has engaged in an abusive squeeze:

(1) the extent to which a person is willing to relax his control or other influence in order to help maintain an orderly market, and the price at which he is willing to do so; for example, behaviour is less likely to amount to an abusive squeeze if a person is willing to lend the investment in question;
(2) the extent to which the person's activity causes, or risks causing, settlement default by other market users on a multilateral basis and not just a bilateral basis. The more widespread the risk of multilateral settlement default, the more likely that an abusive squeeze has been effected;
(3) the extent to which prices under the delivery mechanisms of the market diverge from the prices for delivery of the investment or its equivalent outside those mechanisms. The greater the divergence beyond that to be reasonably expected, the more likely that an abusive squeeze has been effected; and
(4) the extent to which the spot or immediate market compared to the forward market is unusually expensive or inexpensive or the extent to which borrowing rates are unusually expensive or inexpensive.

01/07/2005

MAR 1.6.12

Squeezes occur relatively frequently when the proper interaction of supply and demand leads to market tightness, but this is not of itself abusive. In addition, having a significant influence over the supply of, or demand for, or delivery mechanisms for an investment, for example, through ownership, borrowing or reserving the investment in question, is not of itself abusive.

01/07/2005

MAR 1.6.13

The effects of an abusive squeeze are likely to be influenced by the extent to which other market users have failed to protect their own interests or fulfil their obligations in a manner consistent with the standards of behaviour to be expected of them in that market. Market users can be expected to settle their obligations and not to put themselves in a position where, to do so, they have to rely on holders of long positions lending when they may not be inclined to do so and may be under no obligation to do so.

01/07/2005

MAR 1.6.14

The following are accepted by the FSA as accepted market practices for the purposes of market abuse (manipulating transactions):

(1) The metal market aberrations regime (see MAR 1 Annex 2 G).

06/04/2006

Examples of market abuse (manipulating transactions)

MAR 1.6.15

The following are examples of behaviour that may amount to market abuse (manipulating transactions):

(1) a trader simultaneously buys and sells the same qualifying investment (that is, trades with himself) to give the appearance of a legitimate transfer of title or risk (or both) at a price outside the normal trading range for the qualifying investment. The price of the qualifying investment is relevant to the calculation of the settlement value of an option. He does this while holding a position in the option. His purpose is to position the price of the qualifying investment at a false, misleading, abnormal or artificial level, making him a profit or avoiding a loss from the option;
(2) a trader buys a large volume of commodity futures, which are qualifying investments, (whose price will be relevant to the calculation of the settlement value of a derivatives position he holds) just before the close of trading. His purpose is to position the price of the commodity futures at a false, misleading, abnormal or artificial level so as to make a profit from his derivatives position;
(3) a trader holds a short position that will show a profit if a particular qualifying investment, which is currently a component of an index, falls out of that index. The question of whether the qualifying investment will fall out of the index depends on the closing price of the qualifying investment. He places a large sell order in this qualifying investment just before the close of trading. His purpose is to position the price of the qualifying investment at a false, misleading, abnormal or artificial level so that the qualifying investment will drop out of the index so as to make a profit; and
(4) a fund manager's quarterly performance will improve if the valuation of his portfolio at the end of the quarter in question is higher rather than lower. He places a large order to buy relatively illiquid shares, which are also components of his portfolio, to be executed at or just before the close. His purpose is to position the price of the shares at a false, misleading, abnormal or artificial level.

01/07/2005

MAR 1.6.16

The following is an example of an abusive squeeze:

A trader with a long position in bond futures buys or borrows a large amount of the cheapest to deliver bonds and either refuses to re-lend these bonds or will only lend them to parties he believes will not re-lend to the market. His purpose is to position the price at which those with short positions have to deliver to satisfy their obligations at a materially higher level, making him a profit from his original position.

01/07/2005

MAR 1.7

Market abuse (manipulating devices)

01/07/2005

MAR 1.7.1

Table: section 118(6) of the Act

"The fifth [type of behaviour] ... consists of effecting transactions or orders to trade

which employ fictitious devices or any other form of deception or contrivance."

01/07/2005

Descriptions of behaviour that amount to market abuse (manipulating devices)

MAR 1.7.2

The following behaviours are, in the opinion of the FSA, market abuse (manipulating devices):

(1) taking advantage of occasional or regular access to the traditional or electronic media by voicing an opinion about a qualifying investment (or indirectly about its issuer) while having previously taken positions on that qualifying investment and profiting subsequently from the impact of the opinions voiced on the price of that instrument, without having simultaneously disclosed that conflict of interest to the public in a proper and effective way; [Note: Article 1.2 Market Abuse Directive]
(2) a transaction or series of transactions that are designed to conceal the ownership of a qualifying investment, so that disclosure requirements are circumvented by the holding of the qualifying investment in the name of a colluding party, such that disclosures are misleading in respect of the true underlying holding. These transactions are often structured so that market risk remains with the seller. This does not include nominee holdings;
(3) pump and dump - that is, taking a long position in a qualifying investment and then disseminating misleading positive information about the qualifying investment with a view to increasing its price;
(4) trash and cash - that is, taking a short position in a qualifying investment and then disseminating misleading negative information about the qualifying investment, with a view to driving down its price.

01/07/2005

Factors to be taken into account in determining whether or not behaviour amounts to market abuse (manipulating devices)

MAR 1.7.3

In the opinion of the FSA , the following factors are to be taken into account in determining whether or not a fictitious device or other form of deception or contrivance has been used, and are indications that it has:

(1) if orders to trade given or transactions undertaken in qualifying investments by persons are preceded or followed by dissemination of false or misleading information by the same persons or persons linked to them;
(2) if orders to trade are given or transactions are undertaken in qualifying investments 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. [Note: Article 5 2003/124/EC]

01/07/2005

MAR 1.8

Market abuse (dissemination)

01/07/2005

MAR 1.8.1

Table: section 118(7) of the Act

" The sixth [type of behaviour] ... consists of the dissemination of information by any means

which gives, or is likely to give, a false or misleading impression as to a [qualifying investment]

by a person who knew or could reasonably be expected to have known that the information was false or misleading."

01/07/2005

MAR 1.8.2

Table: section 118A(4) of the Act

"For the purposes of section 118(7), the dissemination of information by a person acting in the capacity of a journalist

is to be assessed taking into account the codes governing their profession

unless he derives, directly or indirectly, any advantage or profits from the dissemination of the information."

01/07/2005

Descriptions of behaviour that amount to market abuse (dissemination)

MAR 1.8.3

The following behaviours are, in the opinion of the FSA , market abuse (dissemination):

(1) knowingly or recklessly spreading false or misleading information about a qualifying investment through the media, including in particular through an RIS or similar information channel;

(2) undertaking a course of conduct in order to give a false or misleading impression about a qualifying investment.

01/07/2005

Factors to be taken into account in determining whether or not behaviour amounts to market abuse (dissemination)

MAR 1.8.4

In the opinion of the FSA, if a normal and reasonable person would know or should have known in all the circumstances that the information was false or misleading, that indicates that the person disseminating the information knew or could reasonably be expected to have known that it was false or misleading.

01/07/2005

MAR 1.8.5

In the opinion of the FSA, if the individuals responsible for dissemination of information within an organisation could only know that the information was false or misleading if they had access to other information that was being held behind a Chinese wall or similarly effective arrangements, that indicates that the person disseminating did not know and could not reasonably be expected to have known that the information was false or misleading.

01/07/2005

Examples of market abuse (dissemination)

MAR 1.8.6

The following are examples of behaviour which may amount to market abuse (dissemination):

(1) a person posts information on an Internet bulletin board or chat room which contains false or misleading statements about the takeover of a company whose shares are qualifying investments and the person knows that the information is false or misleading;
(2) a person responsible for the content of information submitted to a regulatory information service submits information which is false or misleading as to qualifying investments and that person is reckless as to whether the information is false or misleading.

01/07/2005

MAR 1.9

Market abuse (misleading behaviour) & market abuse (distortion)

01/07/2005

MAR 1.9.1

Table: section 118(8) of the Act:

"The seventh [type of behaviour] is where the [behaviour] (not [amounting to market abuse (manipulating transactions), market abuse (manipulating devices), or market abuse (dissemination)])

(a)

is likely to give, a [regular user] of the market a false or misleading impression as to the supply of, demand for or price or value of, [qualifying investments] [market abuse (misleading behaviour)]; or

(b)

would be, or would be to likely to be, regarded by a [regular user] of the market as [behaviour] that would distort, or would be likely to distort, the market in such an investment [market abuse (distortion)]

and ... is likely to be regarded by a [regular user] of the market as a failure on the part of the person concerned to observe the standard of [behaviour] reasonably expected of a person in his position in relation to the market

01/07/2005

Descriptions of behaviour that amount to market abuse (misleading behaviour) under section 118(8)(a) or market abuse (distortion) under section 118(8)(b)

MAR 1.9.2

The following behaviours are, in the opinion of the FSA, market abuse (misleading behaviour) if they give, or are likely to give, a regular user of the market a false or misleading impression:

(1) the movement of physical commodity stocks, which might create a misleading impression as to the supply of, or demand for, or price or value of, a commodity or the deliverable into a commodity futures contract; and
(2) the movement of an empty cargo ship, which might create a false or misleading impression as to the supply of, or the demand for, or the price or value of a commodity or the deliverable into a commodity futures contract.

01/07/2005

MAR 1.9.3

Behaviour that complies with the requirements imposed on long position holders in the metal market aberrations regime will not amount to market abuse (distortion).

06/04/2006

Factors to be taken into account: false or misleading impressions

MAR 1.9.4

In the opinion of the FSA, the following factors are to be taken into account in determining whether or not behaviour is likely to give a regular user a false or misleading impression as to the supply of or the demand for or as to the price or value of one or more qualifying investments or related investments:

(1) the experience and knowledge of the users of the market in question;
(2) the structure of the market, including its reporting, notification and transparency requirements;
(3) the legal and regulatory requirements of the market concerned;
(4) the identity and position of the person responsible for the behaviour which has been observed (if known); and
(5) the extent and nature of the visibility or disclosure of the person's activity.

01/07/2005

Factors to be taken into account: standards of behaviour

MAR 1.9.5

In the opinion of the FSA, the following factors are to be taken into account in determining whether or not behaviour that creates a false or misleading impression as to, or distorts the market for, a qualifying investment, has also failed to meet the standard expected by a regular user:

(1) if the transaction is pursuant to a prior legal or regulatory obligation owed to a third party;
(2) if the transaction is executed in a way which takes into account the need for the market as a whole to operate fairly and efficiently; or
(3) the characteristics of the market in question, including the users and applicable rules and codes of conduct (including, if relevant, any statutory or regulatory obligation to disclose a holding or position, such as under DTR 5;
(4) the position of the person in question and the standards reasonably to be expected of him in light of his experience, skill and knowledge;
(5) if the transaction complied with the rules of the relevant prescribed markets about how transactions are to be executed in a proper way (for example, rules on reporting and executing cross-transactions); and
(6) if an organisation has created a false or misleading impression, whether the individuals responsible could only know they were likely to create a false or misleading impression if they had access to other information that was being held behind a Chinese wall or similarly effective arrangements.

06/10/2007

MAR 1.10

Statutory exceptions

01/07/2005

Behaviour that does not amount to market abuse (general): buy-back programmes and stabilisation

MAR 1.10.1

(1) Behaviour which conforms with articles 3 to 6 of the Buy-back and Stabilisation Regulation (see MAR 1 Annex 1) will not amount to market abuse.
(2) See MAR 2 in relation to stabilisation.
(3) Buy-back programmes which are not within the scope of the Buy-back and Stabilisation Regulation are not, in themselves, market abuse.

01/07/2005

FSA rules

MAR 1.10.2

There are no rules which permit or require a person to behave in a way which amounts to market abuse. Some rules contain a provision to the effect that behaviour conforming with that rule does not amount to market abuse:

(1) the control of information rule (SYSC 10.2.2 R (1) (see SYSC 10.2.2 R (4))); and
(2) those parts of the Part 6 rules which relate to the timing, dissemination or availability, content and standard of care applicable to a disclosure, announcement, communication or release of information (see in particular the Disclosure Rules and Transparency Rules).

01/11/2007

Takeover Code

MAR 1.10.3

There are no rules in the Takeover Code, which permit or require a person to behave in a way which amounts to market abuse.

06/02/2007

MAR 1.10.4

Behaviour conforming with any of the rules of the Takeover Code about the timing, dissemination or availability, content and standard of care applicable to a disclosure, announcement, communication or release of information, does not, of itself, amount to market abuse, if:

(1) the rule is one of those specified in the table in MAR 1.10.5 C;
(2) the behaviour is expressly required or expressly permitted by the rule in question (the notes for the time being associated with the rules identified in the Takeover Code are treated as part of the relevant rule for these purposes); and
(3) it conforms to any General Principle set out at Section B of the Takeover Code relevant to that rule.

06/02/2007

MAR 1.10.5

Table: Provisions of the Takeover Code conformity with which will not, of itself, amount to market abuse (This table belongs to MAR 1.10.4C):

Takeover Code provisions:

Disclosure of information which is not generally available

1(a)
2.1 plus notes, 2.5, 2.6, 2.9 plus notes
8
19.7
20.1, 20.2, 20.3
28.4
37.3(b) and 37.4(a)

Standards of care

2.8 first sentence and note 4
19.1, 19.5 second sentence and note 2, 19.8
23 plus notes
28.1

Timing of announcements, documentation and dealings

2.2, 2.4(b)
5.4
6.2(b)
7.1
11.1 note 6 only
17.1
21.2
30
31.6(c), 31.9
33 (in so far as it refers 31.6(c) and 31.9 only)
38.5

Content of announcements

2.4 (a) and (b)
19.3

06/02/2007

MAR 1.10.6

Behaviour conforming with Rule 4.2 of the Takeover Code (in relation to restrictions on dealings by offerors and concert parties) does not, of itself, amount to market abuse, if:

(1) the behaviour is expressly required or expressly permitted by that rule (the notes for the time being associated with the rules identified in the Takeover Code are treated as part of the rule for these purposes); and
(2) it conforms to any General Principle set out at Section B of the Takeover Code relevant to the rule.

01/07/2005

MAR 1 Annex 1

Provisions of the Buy-back and Stabilisation Regulation relating to buy-back programmes

01/12/2004

MAR 1 Annex 1.1

1.1.1

The effect of article 8 of the Market Abuse Directive and section 118A(5)(b) of the Act is that behaviour which conforms with the buy-back provisions in the Buy-back and Stabilisation Regulation will not amount to market abuse.

1.1.2

As the Buy-back and Stabilisation Regulation is not directed at the protection of shareholder interests, issuers will also need to consult both the Companies Act 1985and the Part 6 rules for the shareholder protection requirements applying to a proposed buy-back.

1.1.3

Table: Article 3 of the Buy-back and Stabilisation Regulation

Article 3

Objectives of buy-back programmes

In order to benefit from the exemption provided for in Article 8 of [the Market Abuse Directive], a [buy-back programme] must comply with Articles 4, 5 and 6 of this Regulation and the sole purpose of that [buy-back programme] must be to reduce the capital of an issuer (in value or in number of shares) or to meet obligations arising from any of the following:

(a)

debt financial instruments exchangeable into equity instruments;

(b)

employee share option programmes or other allocations of shares to employees of the issuer or of an associate company.

1.1.4

Table: Relevant Recitals (Article 3) from the Buy-back and Stabilisation Regulation

Recital 3

... the exemptions created by this Regulation only cover behaviour directly related to the purpose of the buy-back and stabilisation activities. Behaviour which is not directly related to the purpose of the buy-back and stabilisation activities shall therefore be considered as any other action covered by [the Market Abuse Directive] and may be the object of administrative measures or sanctions, if the competent authority establishes that the action in question constitutes market abuse.

1.1.5

Table: Article 4 of the Buy-back and Stabilisation Regulation

Article 4

Conditions for buy-back programmes and disclosure

The [buy-back programme] must comply with the conditions laid down by Article 19(1) of [the PLC Safeguards Directive].

Prior to the start of trading, full details of the programme approved in accordance with Article 19(1) of [the PLC Safeguards Directive] must be [adequately disclosed to the public] in Member States in which an issuer has requested admission of its shares to trading on a [regulated market].

Those details must include the objective of the programme as referred to in Article 3, the maximum consideration, the maximum number of shares to be acquired and the duration of the period for which authorisation for the programme has been given.

Subsequent changes to the programme must be subject to [adequate public disclosure] in Member States.

The issuer must have in place the mechanisms ensuring that it fulfils trade reporting obligations to the competent authority of the [regulated market] on which the shares have been admitted to trading. These mechanisms must record each transaction related to [buy-back programmes], including the information specified in Article 20(1) of the [ISD].

The issuer must publicly disclose details of all transactions as referred to in paragraph 3 no later than the end of the seventh daily market session following the date of execution of such transactions.

1.1.6

The information specified in article 20(1) of the ISD is the names and numbers of the instruments bought or sold, the dates and times of the transactions, the transaction prices and means of identifying the investment firms concerned.

1.1.7

Article 19(1) of the PLC Safeguards Directive is implemented in Great Britain by section 166 of the Companies Act 1985.

1.1.8

The FSA accepts disclosure through a regulatory information service as adequate public disclosure.

1.1.9

Table: Article 5 of the Buy-back and Stabilisation Regulation

Article 5

Conditions for trading

In so far as prices are concerned, the issuer must not, when executing trades under a [buy-back programme], purchase shares at a price higher than the higher of the price of the last independent trade and the highest current independent bid on the trading venues where the purchase is carried out.

If the trading venue is not a [regulated market], the price of the last independent trade or the highest current independent bid taken in reference shall be the one of the [regulated market] of the Member State in which the purchase is carried out.

Where the issuer carries out the purchase of own shares through derivative financial instruments, the exercise price of those derivative financial instruments shall not be above the higher of the price of the last independent trade and the highest current independent bid.

In so far as volume is concerned, the issuer must not purchase more than 25% of the average daily volume of the shares in any one day on the [regulated market] on which the purchase is carried out.

The average daily volume figure must be based on the average daily volume traded in the month preceding the month of public disclosure of that programme and fixed on that basis for the authorised period of the programme.

Where the programme makes no reference to that volume, the average daily volume figure must be based on the average daily volume traded in the 20 trading days preceding the date of purchase.

For the purposes of paragraph 2, in cases of extreme low liquidity on the relevant market, the issuer may exceed the 25 % limit, provided that the following conditions are met:

(a)

the issuer informs the competent authority of the relevant market, in advance, of its intention to deviate from the 25 % limit;

(b)

the issuer [makes an adequate public disclosure of] the fact that it may deviate from the 25 % limit;

(c)

the issuer does not exceed 50 % of the average daily volume.

1.1.10

Table: Relevant recitals (Article 5) from the Buy-back and Stabilisation Regulation

Recital 9

In order to prevent market abuse the daily volume of trading in own shares in buy-back programmes shall be limited. However, some flexibility is necessary in order to respond to given market conditions such as a low level of transactions.

Recital 10

Particular attention has to be paid to the selling of own shares during the life of a [buy-back programme] to the possible existence of closed periods within issuers during which transactions are prohibited and to the fact that an issuer may have legitimate reasons to delay public disclosure of inside information.

1.1.11

Whether a case of extreme low liquidity exists for the purposes of article 5(3) will depend on the circumstance of each case. Issuers and their advisers may wish to approach the FSA and seek further individual guidance on cases that come within article 5(3).

1.1.12

Table: Article 6 of the Buy-back and Stabilisation Regulation

Article 6

Restrictions

In order to benefit from the exemption provided by Article 8 of [the Market Abuse Directive], the issuer shall not, during its participation in a [buy-back programme], engage in the following trading:

(a)

selling of own shares during the life of the programme;

(b)

trading during a period which, under the law of the Member State in which trading takes place, is a closed period;

(c)

trading where the issuer has decided to delay the public disclosure of inside information in accordance with Article 6(2) of [the Market Abuse Directive].

Paragraph 1(a) shall not apply if the issuer is an [investment firm] or [credit institution] and has established effective information barriers (Chinese Walls) subject to supervision by the competent authority, between those responsible for the handling of [inside information] related directly or indirectly to the issuer and those responsible for any decision relating to the trading of own shares (including the trading of own shares on behalf of clients), when trading in own shares on the basis of such any decision.

Paragraphs 1(b) and (c) shall not apply if the issuer is an [investment firm] or [credit institution] and has established effective information barriers (Chinese Walls) subject to supervision by the competent authority, between those responsible for the handling of inside information related directly or indirectly to the issuer (including trading decisions under the "buy-back" programme) and those responsible for the trading of own shares on behalf of clients, when trading in own shares on behalf of those clients.

Paragraph 1 shall not apply if:

(a)

the issuer has in place a [time-scheduled buy-back programme]; or

(b)

the buy-back programme is lead-managed by an [investment firm] or a [credit institution] which makes its trading decisions in relation to the issuer's shares independently of, and without influence by, the issuer with regard to the timing of the purchases.

1.1.13

For the purposes of article 6(1)(b) of the Buy back and Stabilisation Regulation, a close period in the United Kingdom is the period during which purchases or early redemptions by a company of its own securities may not be made under the Part 6 Rules.

1.1.14

Article 6(2) of the Market Abuse Directive, referred to in article 6(1)(c) of the Buy-Back and Stabilisation Regulation, is implemented in the United Kingdom by the Disclosure Rules and Transparency Rules.

01/07/2005

MAR 1 Annex 2

Accepted Market Practices

01/07/2005

Table: Part 1 - General

An accepted market practice features in section 118 in the following ways:

(1)

it is an element in deciding what is inside information in the commodity markets (and see MAR 1.2.17 G to MAR 1.2.19 UK);

(2)

it provides a defence for market abuse (manipulating transactions).

The FSA will take the following non-exhaustive factors into account when assessing whether to accept a particular market practice:

(1)

the level of transparency of the relevant market practice to the whole market;

(2)

the need to safeguard the operation of market forces and the proper interplay of the forces of supply and demand (taking into account 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);

(3)

the degree to which the relevant market practice has an impact on market liquidity and efficiency;

(4)

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;

(5)

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;

(6)

the outcome of any investigation of the relevant market practice by any competent authority or other authority mentioned in Article 12(1) of the Market Abuse Directive, 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; and

(7)

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.

[deleted]

06/06/2008

MAR 2

Stabilisation

MAR 2.1

Application and Purpose

01/07/2005

Application

MAR 2.1.1

This chapter applies to every firm.

01/07/2005

MAR 2.1.2

This chapter is available to every person who wishes to show that he acted in conformity with:

(1) the Buy-back and Stabilisation Regulation, in accordance with section 118A(5)(b) of the Act; or

(2) rules, in accordance with section 118A(5)(a) of the Act; or

(3) the price stabilising rules, for the purposes of paragraph 5(1) of Schedule 1 to the Criminal Justice Act 1993 (Insider Dealing); or

(4) the price stabilising rules, for the purposes of section 397(4) or (5)(b) of the Act (Misleading statements and practices).

01/07/2005

MAR 2.1.3

This chapter:

(1) so far as it provides a defence for any person, has the same territorial application as the provision which is alleged to have been contravened: and
(2) in its application to a firm for purposes other than those falling within (1), applies to the firm's business carried on from an establishment in the United Kingdom.

01/07/2005

Purpose

MAR 2.1.4

The purpose of this chapter is to describe the extent to which stabilisation activity has the benefit of a "safe harbour" for market abuse under the Buy-back and Stabilisation Regulation (see MAR 2.2 and MAR 2.3), and to specify by rules the extent to which stabilisation activity has the benefit of a "safe harbour" for market abuse (misuse of information), market abuse (misleading behaviour) or market abuse (distortion) (see MAR 2.2 and MAR 2.4), or for the criminal offences referred to in MAR 2.1.2 G (3) and MAR 2.1.2 G (4) (MAR 2.3 - MAR 2.5).

01/07/2005

MAR 2.1.5

Stabilisation transactions mainly have the effect of providing support for the price of an offering of relevant securities during a limited time period if they come under selling pressure, thus alleviating sales pressure generated by short term investors and maintaining an orderly market in the relevant securities. This is in the interest of those investors having subscribed or purchased those relevant securities in the context of a significant distribution, and of issuers. In this way, stabilisation can contribute to greater confidence of investors and issuers in the financial markets. [Note: Recital 11 of the Buy-back and Stabilisation Regulation]

01/07/2005

MAR 2.1.6

Stabilisation activity may be carried out either on or off a regulated market and may be carried out by use of financial instruments other than those admitted or to be admitted to the regulated market which may influence the price of the instrument admitted or to be admitted to trading on a regulated market. [Note: Recital 12 Buy-back and Stabilisation Regulation]

01/07/2005

MAR 2.2

Stabilisation: general

01/07/2005

Permitted stabilisation

MAR 2.2.1

Stabilisation or ancillary stabilisation may be carried out by a firm in relation to a significant distribution of securities, if:

(1) they are relevant securities that have been admitted to trading on a regulated market or a request for their admission to trading on such a market has been made, and the stabilisation is carried out in accordance with the Buy-back and Stabilisation Regulation (see MAR 2.3); or

(2) the securities are not within (1) and they:

(a) have been admitted to trading on a market, exchange or other institution included in MAR 2 Annex 1 R; or

(b) a request for their admission to trading on such a market, exchange or institution has been made; or

the stabilisation or ancillary stabilisation is carried out in accordance with the provisions in MAR 2.4.

01/07/2005

MAR 2.2.2

Relevant securities include financial instruments that become fungible after an initial period because they are substantially the same, although they have different initial dividend or interest payment rights. [Note: Recital 13 Buy-back and Stabilisation Regulation.]

01/07/2005

Scope of stabilisation "safe harbours" for market abuse

MAR 2.2.3

For the purposes of section 118A(5)(a) of the Act, behaviour (whether by a firm or not) conforming with the MAR 2.2.1R (2) does not amount to market abuse.

02/07/2005

MAR 2.2.4

The effect of article 8 of the Market Abuse Directive and section 118A(5)(b) of the Act is that behaviour by any person which conforms with the stabilisation provisions in the Buy-back and Stabilisation Regulation (see MAR 2.3) will not amount to market abuse.

01/07/2005

MAR 2.2.5

However, the mere fact that stabilisation does not conform with the stabilisation provisions in the Buy-back and Stabilisation Regulation (see MAR 2.3) or with) MAR 2.2.1R (2) will not of itself mean that the behaviour constitutes market abuse. [Note: Recital 2 Buy-back and Stabilisation Regulation]

01/07/2005

Block trades

MAR 2.2.6

In relation to stabilisation, block trades are not considered as a significant distribution of relevant securities as they are strictly private transactions. [Note: Recital 14 Buy-back and Stabilisation Regulation]

01/07/2005

Behaviour not related to stabilisation

MAR 2.2.7

On the other hand, the exemptions created by the Buy-back and Stabilisation Regulation only cover behaviour directly related to the purpose of stabilisation activities. Behaviour which is not directly related to the purpose of stabilisation activities is therefore considered in the same way as any other action covered by the Market Abuse Directive and may result in sanctions, if the competent authority establishes that the action in question constitutes market abuse. [Note: Recital 3 Buy-back and Stabilisation Regulation]

01/07/2005

MAR 2.2.8

In order to avoid confusion of market participants, stabilisation activity should be carried out by taking into account the market conditions and the offering price of the relevant security and transactions to liquidate positions established as a result of stabilisation activity should be undertaken to minimise market impact having due regard to prevailing market conditions. [Note: Recital 18 Buy-back and Stabilisation Regulation]

01/07/2005

Rights of action for damages

MAR 2.2.9

A contravention of the rules in MAR 2 does not give rise to a right of action by a private person under section 150 of the Act (and each of those rules is specified under section 150(2) of the Act as a provision giving rise to no such right of action).

01/07/2005

MAR 2.3

Stabilisation under the Buy-back and Stabilisation Regulation

01/07/2005

Conditions for stabilisation: general

MAR 2.3.1

Table: Article 7 of the Buy-back and Stabilisation Regulation

Article 7

Conditions for stabilisation

In order to benefit from the exemption provided for in Article 8 of [the Market Abuse Directive], [stabilisation] of a [financial instrument] must be carried out in accordance with Articles 8, 9 and 10 of this Regulation [see MAR 2.3.4 E, MAR 2.3.5 EU and MAR 2.3.6 G].

01/07/2005

MAR 2.3.2

Article 8 of the Market Abuse Directive is implemented in the United Kingdom in section 118A(5)(b) of the Act.

01/07/2005

MAR 2.3.3

For the purposes of article 2(8) of the Buy-back and Stabilisation Regulation the standards of transparency of the markets, exchanges and institutions referred to in MAR 2.2.1R (2) are considered by the FSA to be adequate.

01/07/2005

Time related conditions for stabilisation

MAR 2.3.4

Table: Article 8 of the Buy-back and Stabilisation Regulation

Article 8

Time related conditions for stabilisation

[Stabilisation] shall be carried out only for a limited time period.

In respect of shares and other securities equivalent to shares, the time period referred to in paragraph 1 shall, in the case of an initial offer publicly announced, start on the date of commencement of trading of the [relevant securities] on the [regulated market] and end no later than 30 calendar days thereafter.

Where the initial offer publicly announced takes place in a Member State that permits trading prior to the commencement of trading on a [regulated market], the time period referred to in paragraph 1 shall start on the date of [adequate public disclosure] of the final price of the [relevant securities] and end no later than 30 calendar days thereafter, provided that any such trading is carried out in compliance with the rules, if any, of the [regulated market] on which the [relevant securities] are to be admitted to trading, including any rules concerning public disclosure and trade reporting.

In respect of shares and other securities equivalent to shares, the time period referred to in paragraph 1 shall, in the case of a secondary offer, start on the date of [adequate public disclosure] of the final price of the [relevant securities] and end no later than 30 calendar days after the date of [allotment].

In respect of bonds and other forms of securitised debt (which are not convertible or exchangeable into shares or into other securities equivalent to shares), the time period referred to in paragraph 1 shall start on the date of [adequate public disclosure] of the terms of the offer of the [relevant securities] (i.e. including the spread to the benchmark, if any, once it has been fixed) and end, whatever is earlier, either no later than 30 calendar days after the date on which the issuer of the instruments received the proceeds of the issue, or no later than 60 calendar days after the date of [allotment] of the [relevant securities].

In respect of securitised debt convertible or exchangeable into shares or into other securities equivalent to shares, the time period referred to in paragraph 1 shall start on the date of [adequate public disclosure] of the final terms of the offer of the [relevant securities] and end, whatever is earlier, either no later than 30 calendar days after the date on which the issuer of the instruments received the proceeds of the issue, or no later than 60 calendar days after the date of [allotment] of the [relevant securities].

01/07/2005

Disclosure and reporting conditions for stabilisation

MAR 2.3.5

Table: Article 9 of the Buy-back and Stabilisation Regulation

Article 9

Disclosure and reporting conditions for stabilisation

The following information shall be [adequately publicly disclosed] by issuers, [offerors], or entities undertaking the [stabilisation] acting, or not, on behalf of such persons, before the opening of the offer period of the [relevant securities]:

(a)

the fact that [stabilisation] may be undertaken, that there is no assurance that it will be undertaken and that it may be stopped at any time;

(b)

the fact that [stabilisation] transactions are aimed to support the market price of the [relevant securities];

(c)

the beginning and end of the period during which [stabilisation] may occur;

(d)

the identity of the [stabilisation] manager, unless this is not known at the time of publication in which case it must be publicly disclosed before any [stabilisation] activity begins;

(e)

the existence and maximum size of any [overallotment facility] or [greenshoe option], the exercise period of the [greenshoe option] and any conditions for the use of the [overallotment facility] or exercise of the [greenshoe option].

The application of the provisions of this paragraph shall be suspended for offers under the scope of application of the measures implementing [the Prospectus Directive], from the date of application of these measures.

Without prejudice to Article 12(1)(c) of [the Market Abuse Directive], the details of all [stabilisation] transactions must be notified by issuers, [offerors], or entities undertaking the [stabilisation] acting, or not, on behalf of such persons, to the competent authority of the relevant market no later than the end of the seventh daily market session following the date of execution of such transactions.

Within one week of the end of the [stabilisation] period, the following information must be adequately disclosed to the public by issuers, [offerors], or entities undertaking the [stabilisation] acting, or not, on behalf of such persons:

(a)

whether or not [stabilisation] was undertaken;

(b)

the date at which [stabilisation] started;

(c)

the date at which [stabilisation] last occurred;

(d)

the price range within which [stabilisation] was carried out, for each of the dates during which [stabilisation] transactions were carried out.

Issuers, [offerors], or entities undertaking the [stabilisation], acting or not, on behalf of such persons, must record each [stabilisation] order or transaction with, as a minimum, the information specified in Article 20(1) of [the ISD ] extended to financial instruments other than those admitted or going to be admitted to the regulated market.

Where several [investment firms] or [credit institutions] undertake the [stabilisation] acting, or not, on behalf of the issuer or [offeror], one of those persons shall act as central point of inquiry for any request from the competent authority of the regulated market on which the [relevant securities] have been admitted to trading.

01/07/2005

MAR 2.3.6

The FSA accepts as adequate public disclosure:

(1) disclosure through a regulatory information service or otherwise in accordance with Part 6 rules; or

(2) the equivalent disclosure mechanism required to be used in relation to the relevant regulated market.

01/07/2005

MAR 2.3.7

Market integrity requires the adequate public disclosure of stabilisation activity by issuers or by entities undertaking stabilisation, acting or not on behalf of these issuers. Methods used for adequate public disclosure of such information should be efficient and can take into account market practices accepted by competent authorities. [Note: Recital 16 Buy-back and Stabilisation Regulation]

01/07/2005

MAR 2.3.8

There should be adequate coordination in place between all investment firms and credit institutions undertaking stabilisation. During stabilisation, one investment firm or credit institution shall act as a central point of inquiry for any regulatory intervention by the competent authority in each Member State concerned. [Note: Recital 17 Buy-back and Stabilisation Regulation]

01/07/2005

MAR 2.3.9

For the purposes of article 9(2) of the Buy-back and Stabilisation Regulation, the FSA is the competent authority of those markets listed as regulated markets at http://www.fsa.gov.uk/register/exchanges.do. Persons undertaking stabilisation will be taken to have notified the FSA for the purposes of article 9(2) if they email details of all their stabilisation transactions to stabilisation@fsa.gov.uk clearly identifying the offer being stabilised and the contact details for the persons undertaking the stabilisation.

01/07/2005

Specific price conditions

MAR 2.3.10

Table: Article 10 of the Buy-back and Stabilisation Regulation

Article 10

Specific price conditions

In the case of an offer of shares or other securities equivalent to shares, [stabilisation] of the [relevant securities] shall not in any circumstances be executed above the offering price.

In the case of an offer of securitised debt convertible or exchangeable into instruments as referred to in paragraph 1, [stabilisation] of those instruments shall not in any circumstances be executed above the market price of those instruments at the time of the public disclosure of the final terms of the new offer.

01/07/2005

Conditions for ancillary stabilisation

MAR 2.3.11

Table: Article 11 of the Buy-back and Stabilisation Regulation

Article 11

Conditions for ancillary stabilisation

In order to benefit from the exemption provided for in Article 8 of [the Market Abuse Directive], [ancillary stabilisation] must be undertaken in accordance with Article 9 of this Regulation and with the following:

(a)

[relevant securities] may be overallotted only during the subscription period and at the offer price;

(b)

a position resulting from the exercise of an [overallotment facility] by an [investment firm] or [credit institution] which is not covered by the [greenshoe option] may not exceed 5 % of the original offer;

(c)

the [greenshoe option] may be exercised by the beneficiaries of such an option only where [relevant securities] have been overallotted;

(d)

the [greenshoe option] may not amount to more than 15% of the original offer;

(e)

the exercise period of the [greenshoe option] must be the same as the [stabilisation] period required under Article 8;

(f)

the exercise of the [greenshoe option] must be disclosed to the public promptly, together with all appropriate details, including in particular the date of exercise and the number and nature of [relevant securities] involved.

01/07/2005

MAR 2.3.12

Overallotment facilities and greenshoe options are closely related to stabilisation, by providing resources and hedging for stabilisation activity. [Note: Recital 19 Buy-back and Stabilisation Regulation]

01/07/2005

MAR 2.3.13

Particular attention should be paid to the exercise of an overallotment facility by an investment firm or a credit institution for the purpose of stabilisation when it results in a position uncovered by the greenshoe option. [Note: Recital 20 Buy-back and Stabilisation Regulation.]

01/07/2005

MAR 2.4

Stabilisation when the Buy-back and Stabilisation Regulation does not apply

01/07/2005

MAR 2.4.1

To comply with MAR 2.2.1R (2) a firm must comply with the provisions in articles 8, 9, 10 and 11 of the Buy-back and Stabilisation Regulation (see MAR 2.3) subject to the modifications set out in the remainder of this section.

01/07/2005

MAR 2.4.2

For the purposes of the application of article 2(6) of the Buy-back and Stabilisation Regulation to this section, references to "relevant securities" are to be taken as references to securities which are within MAR 2.2.1R (2).

01/07/2005

MAR 2.4.3

For the purposes of the application of article 2(8) of the Buy-back and Stabilisation Regulation to this section, the requirement for the competent authority to agree to the standards of transparency does not apply.

01/07/2005

MAR 2.4.4

Article 8 of the Buy-back and Stabilisation Regulation is subject to the following modifications:

(1) the references to "adequate public disclosure" are to be taken as including any public announcement which provides adequate disclosure of the fact that stabilisation may take place in relation to the offer, for example:

(a) in the case of a screen-based announcement, wording such as "stabilisation/FSA"; or

(b) in the case of a final offering circular or prospectus, wording such as "In connection with this [issue][offer], [name of stabilisation manager] [or any person acting for him] may over-allot or effect transactions with a view to supporting the market price of [description of relevant securities and any associated investments] at a level higher than that which might otherwise prevail for a limited period after the issue date. However, there may be no obligation on [name of stabilisation manager] [or any agent of his] to do this. Such stabilising, if commenced, may be discontinued at any time, and must be brought to an end after a limited period."; and

(2) a person is taken to comply the requirements of article 9(1) of the Buy-back and Stabilisation Regulation for these purposes if a public announcement before the opening of the offer period indicates (in whatever terms) the fact that stabilisation may take place so long as any preliminary or final offering circular (or prospectus) contains the information specified in that article (other than information on the maximum size of any overallotment facility).

01/07/2005

MAR 2.4.5

Article 9 of the Buy-back and Stabilisation Regulation is subject to the following modifications:

(1) the references to "adequate public disclosure" are to be taken as including any public announcement which complies with MAR 2.4.4 R;

(2) article 9(2) does not apply;

(3) article 9(3) does not apply; and

(4) in article 9(4) the phrase "order or" does not apply.

01/07/2005

MAR 2.4.6

Article 10 of the Buy-back and Stabilisation Regulation is modified so that the reference to "public disclosure" is to be taken as including any public announcement which complies with MAR 2.4.4 R.

01/07/2005

MAR 2.4.7

Article 11 of the Buy-back and Stabilisation Regulation is subject to the following modifications:

(1) the reference to "disclosure to the public" is to be taken as including any public announcement which complies with MAR 2.4.4 R and

(2) article 11(b) and (d) do not apply.

01/07/2005

MAR 2.5

The Price Stabilising Rules: overseas provisions

01/07/2005

MAR 2.5.1

(1) A person who in any place outside the United Kingdom acts or engages in conduct:

(a) for the purposes of stabilising the price of investments;

(b) in conformity with the provisions specified in (2), (3) or (4); and

(c) in relation to an offer which is governed by the law of a country (or a state or territory in a country) so specified;

is to be treated for the purposes of section 397(5)(b) of the Act (misleading statements and practices) as acting or engaging in conduct for that purpose and in conformity with the price stabilising rules.

(2) In relation to the United States of America, the specified provisions are:

(a) Regulation M made by the Securities and Exchange Commission (17 CFR 242, # 100-105).

(3) In relation to Japan, the specified provisions are

(a) The Securities and Exchange Law of Japan, (Law No 25, April 13 1948), Article 159, paragraphs 3 and 4;

(b) Cabinet Orders for the Enforcement of the Securities and Exchange Law of Japan (Cabinet Order 321, September 30, 1965), Articles 20 to 26;

(c) Ministerial Ordinance concerning the Registration of Stabilisation Trading (Ordinance of the Ministry of Finance No 43, June 14, 1971);

(d) Ministerial Ordinance concerning rules and otherwise governing the soundness of securities companies (Ordinance of the Ministry of Finance, No 60, November 5, 1965), Article 2.

(4) In relation to Hong Kong, the specified provisions are:

(a) The Securities and Futures (Price Stabilizing) Rules, Cap. 571 W made by the Hong Kong Securities and Futures Commission.

(5) The provisions in (2), (3) and (4) are specified as they have effect from time to time, so long as this paragraph has effect.

01/07/2005

MAR 2.5.2

A person who is treated under MAR 2.5.1R (1) as acting or engaging in conduct in conformity with the price stabilising rules is also to be treated to an equivalent extent as so acting or engaging for the purposes of:

(1) MAR 2.2.1R (2) and MAR 2.2.2 G, provided that the investments concerned are not admitted to trading on a regulated market and there has been no request for admission to trading on a regulated market;

(2) Part XIV (Disciplinary measures); and

(3) Part XXV (Injunctions and Restitution) of the Act.

01/07/2005

MAR 2 Annex 1

List of specified exchanges (This is the list of other specified exchanges referred to in MAR 2.2.1R(2))

01/07/2005

MAR 2 Annex 1

Any prescribed market which is not a regulated market

Any recognised overseas investment exchange

American Stock Exchange (AMEX)

Australian Stock Exchange

Bolsa Mexicana de Valores

Canadian Venture Exchange

Hong Kong Stock Exchange

Johannesburg Stock Exchange

Korea Stock Exchange

Midwest Stock Exchange

Montreal Stock Exchange

New York Stock Exchange (NYSE)

New Zealand Stock Exchange

Osaka Securities Exchange (OSE)

Pacific Stock Exchange

Phildelphia Stock Exchange

Singapore Exchange Securities Trading Limited

Tokyo Stock Exchange (TSE)

Toronto Stock Exchange

01/07/2005

MAR 4

Endorsement of the Takeover Code

MAR 4.1

APPLICATION AND PURPOSE

01/12/2004

Application

MAR 4.1.1

This chapter applies to every firm whose permission includes, or ought to include, any designated investment business, except as set out in MAR 4.4.1 R.

20/09/2001

MAR 4.1.2

MAR 4.1.1 R applies regardless of whether the firm's activity:

(1) is a regulated activity;

(2) is carried on from an office of the firm in the United Kingdom; or

(3) is in respect of a client in the United Kingdom.

20/09/2001

Purpose

MAR 4.3

SUPPORT OF THE TAKEOVER PANEL'S FUNCTIONS

06/02/2007

MAR 4.3.1

A firm must not act, or continue to act, for any person in connection with a transaction to which the Takeover Code applies (including a transaction subject to rule 8 (Disclosure of dealings during the offer period; also indemnity and other arrangements) of the Takeover Code) if the firm has reasonable grounds for believing that the person in question, or his principal, is not complying or is not likely to comply with the Takeover Code.

06/02/2007

MAR 4.3.2

(1) The Takeover Panel publishes notices regarding compliance with the Takeover Code. It may also, from time to time, name in those notices persons as persons that, in the Takeover Panel's opinion, are not likely to comply with the Takeover Code. Any notices of this type will be available on the Takeover Panel's website (www.thetakeoverpanel.org.uk).

(2) A firm should keep itself informed of Takeover Panel notices and take them into account in seeking to comply with MAR 4.3.1 R. If the Takeover Panel were to name such a person in such a notice, the FSA would expect a firm to comply with MAR 4.3.1 R by not acting or continuing to act for that person.

(3) The FSA would not regard a firm as in breach of MAR 4.3.1 R where the Takeover Panel has indicated that it is content for the firm to act in relation to that transaction.

06/02/2007

MAR 4.3.3

(1) Where a restriction under MAR 4.3.1 R applies, among other things the firm is prevented from carrying on any designated investment business activity, or communicating or approving any financial promotion, in connection with a transaction to which the Takeover Codeapplies.

(2) Where a restriction under MAR 4.3.1 R applies, the firm is not prevented from carrying on other activities (including regulated activities) in relation to that person. This includes designated investment business activity which is not in connection with a transaction to which the Takeover Codeapplies.

06/02/2007

MAR 4.3.4

(1) Where a restriction under MAR 4.3.1 R applies, an authorised professional firm is not prevented from providing professional advice or representation in any proceedings to the person where that falls within section 327(8) of the Act. This means that the person can obtain legal advice or representation in any proceedings from a law firm and accounting advice from an accounting firm: see MAR 4.4.1 R (2).

(2) While the FSA recognises the duty of authorised professional firms to act in the best interests of their clients, the duty cannot override the provisions of the Takeover Codeso as to require the authorised professional firm to provide services in breach of, or enable breach of, the Takeover Code.

06/02/2007

MAR 4.3.5

A firm must provide to the Takeover Panel:

(1) any information and documents in its possession or under its control which the Takeover Panel requests to enable the Takeover Panel to perform its functions; and

(2) such assistance as the Takeover Panel requests and as the firm is reasonably able to provide to enable the Takeover Panel to perform its functions.

20/09/2001

MAR 4.3.6

In MAR 4.3.5 R, "documents" includes information recorded in any form and, in relation to information recorded otherwise than in legible form, references to providing documents include references to producing a copy of the information in legible form.

20/09/2001

MAR 4.3.7

As a result of section 413 of the Act (Limitation on powers to require documents), MAR 4.3.5 R does not require a firm or an authorised professional firm to produce, disclose or permit the inspection of protected items.

20/09/2001

MAR 4.4

EXCEPTIONS

01/12/2004

MAR 4.4.1

This chapter is subject to the following exceptions:

(1) this chapter does not require an authorised professional firm to contravene any rule or principle of, or requirement of a published guidance note relating to, professional conduct applying generally to members of the profession regulated by its designated professional body;

(2) this chapter does not prevent an authorised professional firm from providing professional advice, that is, in accordance with section 327(8) of the Act, advice:

(a) which does not constitute carrying on a regulated activity; and

(b) the provision of which is supervised and regulated by a designated professional body;

(3) this chapter does not have effect in relation to an authorised professional firm in respect of non-mainstream regulated activity; and

(4) this chapter does not apply to:

(a) a UCITS qualifier; or

(b) an incoming EEA firm which has permission only for cross border services and which does not carry on regulated activities in the United Kingdom.

20/09/2001

MAR 5

Multilateral trading facilities (MTFs)

MAR 5.1

Application

01/11/2007

MAR 5.1.1

This chapter applies to:

(1)

a UK domestic firm which operates an MTF from an establishment in the United Kingdom or elsewhere; or

(2)

an overseas firm which operates an MTF from an establishment in the United Kingdom.

01/11/2007

MAR 5.1.2

In this chapter, provisions marked "EU" apply to an overseas firm as if they were rules.

01/11/2007

MAR 5.2

Purpose

01/11/2007

MAR 5.2.1

The purpose of this chapter is to implement the provisions of MiFID relating to firms operating MTFs, specifically articles 14, 26, 29 and 30 of MiFID. This chapter does not apply to bilateral systems, which are excluded from the MTF definition. It sets out for reference other provisions of the MiFID Regulation relevant to the articles being implemented.

01/11/2007

MAR 5.3

Trading process requirements

01/11/2007

MAR 5.3.1

A firm operating an MTF must have:

(1) transparent and non-discretionary rules and procedures for fair and orderly trading;
[Note: Article 14(1) of MiFID]

(2) objective criteria for the efficient execution of orders;
[Note: Article 14(1) of MiFID]

(3) transparent rules regarding the criteria for determining the financial instruments that can be traded under its systems;
[Note: Subparagraph 1 of Article 14(2) of MiFID]

(4) transparent rules, based on objective criteria, governing access to its facility, which rules must provide that its members or participants are investment firms, BCD credit institutions or other persons who:

(a) are fit and proper;

(b) have a sufficient level of trading ability and competence;

(d) have sufficient resources for the role they are to perform, taking into account the different financial arrangements that the firm operating the MTF may have established in order to guarantee the adequate settlement of transactions; and

[Note: Article 14(4) and 42(3) of MiFID]

(5) where applicable must provide, or be satisfied that there is access to, sufficient publicly available information to enable its users to form an investment judgment, taking into account both the nature of the users and the types of instrument traded.
[Note: Subparagraph 2 of Article 14(2) of MiFID]

01/11/2007

Publication of pre and post-trade information for shares not admitted to trading on a regulated market

MAR 5.3.2

In the case of shares not admitted to trading on a regulated market, the FSA expects that in order to fulfil the requirements in MAR 5.3.1 R as regards fair and orderly trading, the firm operating the MTF will make public on reasonable commercial terms:

(1) on a continuous basis during normal trading hours, information about the quotes and orders relating to these shares which the MTF displays or advertises to its users; and

(2) as close to real time as possible, information about the price, volume and time of transactions in these shares executed under its systems.

01/11/2007

MAR 5.3.3

The firm may make information about a large quote, order or transaction available under MAR 5.3.2 G on a delayed basis, but only to the extent reasonably necessary to protect the interests of the relevant user who placed the order, provided the quote or executed the transaction.

01/11/2007

Publication of post-trade information for financial instruments other than shares

MAR 5.3.4

Where financial instruments other than shares are traded on an MTF, and the same or substantially similar instruments are also traded on a UK RIE, a regulated market or an EEA commodities market, the FSA expects that in order to fulfil the requirements in MAR 5.3.1 R as regards fair and orderly trading, the firm operating the MTF will make public, on reasonable commercial terms and as close to real time as possible, the price, volume and time of the transactions executed under its systems.

01/11/2007

MAR 5.3.5

For large transactions in debt securities, an indication that volume exceeded a certain figure (not being less than £7 million or its equivalent) instead of the actual volume is sufficient transparency of the volume of a trade.

01/11/2007

MAR 5.3.6

The firm may make information about a large quote, order or transaction available under MAR 5.3.4 G on a delayed basis, but only to the extent reasonably necessary to protect the interests of the relevant user who placed the order, provided the quote or executed the transaction.

01/11/2007

Operation of a primary market in shares not admitted to trading on a regulated market

MAR 5.3.7

The FSA will be minded to impose a variation on the Part IV permission of an MTF operator that operates a primary market in shares not admitted to trading on a regulated market in order to ensure its fulfilment of the requirements in MAR 5.3.1 R as regards fair and orderly trading.

01/11/2007

Transferable securities traded without issuer consent

MAR 5.3.8

Where a transferable security, which has been admitted to trading on a regulated market, is also traded on an MTF without the consent of the issuer, the firm operating the MTF must not make the issuer subject to any obligation relating to initial, ongoing or ad hoc financial disclosure with regard to that MTF.
[Note: Article 14(6) of MiFID]

01/11/2007

MAR 5.4

Finalisation of transactions

01/11/2007

MAR 5.4.1

A firm operating an MTF must:

(1) clearly inform its users of their respective responsibilities for the settlement of transactions executed in that MTF; and

(2) have in place the arrangements necessary to facilitate the efficient settlement of the transactions concluded under its systems.

[Note: Article 14(5) of MiFID]

01/11/2007

MAR 5.5

Monitoring compliance with the rules of the MTF

01/11/2007

MAR 5.5.1

A firm operating an MTF must:

(1) have effective arrangements and procedures, relevant to the MTF, for the regular monitoring of the compliance by its users with its rules; and

(2) monitor the transactions undertaken by its users under its systems in order to identify breaches of those rules, disorderly trading conditions or conduct that may involve market abuse.
[Note: Article 26(1) of MiFID]

01/11/2007

MAR 5.6

Reporting requirements

01/11/2007

MAR 5.6.1

A firm operating an MTF must:

(1) report to the FSA:

(a) significant breaches of the firm's rules;

(b) disorderly trading conditions; and

(2) supply the information required under this rule without delay to the FSA and any other authority competent for the investigation and prosecution of market abuse; and

(3) provide full assistance to the FSA , and any other authority competent for the investigation and prosecution of market abuse, in its investigation and prosecution of market abuse occurring on or through the firm's systems.

[Note: Article 26(2) of MiFID]

01/11/2007

MAR 5.7

Pre-trade transparency requirements for shares

01/11/2007

MAR 5.7.1

(1) Unless (2),(3) or (4) applies, in respect of shares admitted to trading on a regulated market, a firm operating an MTF must make public, on reasonable commercial terms and on a continuous basis during normal trading hours:

(a) the current bid and offer prices which are advertised through its systems; and

(b) the depth of trading interests at those prices.

[Note: Article 29(1) of MiFID]

(2) Paragraph (1) does not apply to systems operated by an MTF to the extent that those systems satisfy one of the criteria in (a) or (b), subject to (c):

(a) they must be based on a trading methodology by which the price is determined in accordance with a reference price generated by another system, where that reference price is widely published and is regarded generally by market participants as a reliable reference price;

(b) they formalise negotiated transactions, each of which meets the criteria in (i) and (ii), subject to the provisions in (iii) and (iv):

(i) it is made at or within the current volume weighted spread reflected on the order book or the quotes of the market makers of the MTF operating that system or, where the share is not traded continuously, within a percentage of a suitable reference price, being a percentage and a reference price set in advance by the system operator;

(ii) it is subject to conditions other than the current market price of the share.

(iii) For the purposes of (b), the other conditions specified in the rules of the MTF for a transaction of this kind must also have been fulfilled.

(iv) Negotiated transaction has the meaning given in Article 19 of the MiFID Regulation.

[Note: Article 19 of the MiFID Regulation is reproduced in MAR 5.7.9 EU.]

(c) In the case of systems having functionality other than as described in (a) or (b), the disapplication does not apply to that other functionality.

(3) Paragraph (1) does not apply in relation to orders held in an order management facility maintained by the MTF pending their being disclosed to the market.

(4)

(a) Paragraph (1) does not apply in relation to orders that are large in scale compared to normal market size for the share or type of share in question.

(b) An order will be considered to be large in scale if it meets the criteria set out in Article 20 of the MiFID Regulation.

[Note: Article 20 of the MiFID Regulation is reproduced in MAR 5.7.10 EU.]

01/11/2007

Pre-trade information

MAR 5.7.2

An investment firm or market operator operating an MTF or a regulated market shall, in respect of each share admitted to trading on a regulated market that is traded within a system operated by it and specified in Table 1 of Annex II [of the MiFID Regulation], make public the information set out in paragraphs 2 to 6.

Where one of the entities referred to in paragraph 1 operates a continuous auction order book trading system, it shall, for each share as specified in paragraph 1, make public continuously throughout its normal trading hours the aggregate number of orders and of the shares those orders represent at each price level, for the five best bid and offer price levels.

Where one of the entities referred to in paragraph 1 operates a quote-driven trading system, it shall, for each share as specified in paragraph 1, make public continuously throughout its normal trading hours the best bid and offer by price of each market maker in that share, together with the volumes attaching to those prices.
The quotes made public shall be those that represent binding commitments to buy and sell the shares and which indicate the price and volume of shares in which the registered market makers are prepared to buy or sell.
In exceptional market conditions, however, one-way prices may be allowed for a limited time.

Where one of the entities referred to in paragraph 1 operates a periodic auction trading system, it shall, for each share specified in paragraph 1, make public continuously throughout its normal trading hours the price that would best satisfy the system's trading algorithm and the volume that would potentially be executable at that price by participants in that system.

Where one of the entities referred to in paragraph 1 operates a trading system which is not wholly covered by paragraph 2 or 3 or 4, either because it is a hybrid system falling under more than one of those paragraphs or because the price determination process is of a different nature, it shall maintain a standard of pre-trade transparency that ensures that adequate information is made public as to the price level of orders or quotes for each share specified in paragraph 1, as well as the level of trading interest in that share.In particular, the five best bid and offer price levels and/or two-way quotes of each market maker in that share shall be made public, if the characteristics of the price discovery mechanism permit it.

A summary of the information to be made public in accordance with paragraphs 2 to 5 is specified in Table 1 of Annex II [of the MiFID Regulation].

[Note: Article 17 of the MiFID Regulation]

01/11/2007

Table 1: Information to be made public in accordance with Article 17

MAR 5.7.3

Type of system

Description of system

Summary of information to be made public, in accordance with Article 17

Continuous auction order book trading system

A system that by means of an order book and a trading algorithm operated without human intervention matches sell orders with matching buy orders on the basis of the best available price on a continuous basis

The aggregate number of orders and the shares they represent at each price level, for at least the five best bid and offer price levels

Quote-driven trading system

A system where transactions are concluded on the basis of firm quotes that are continuously made available to participants, which requires the market makers to maintain quotes in a size that balances the needs of members and participants to deal in a commercial size and the risk to which the market maker exposes itself

The best bid and offer by price of each market maker in that share, together with the volumes attaching to those prices

Periodic auction trading system

A system that matches orders on the basis of a periodic auction and a trading algorithm operated without human intervention

The price at which the auction trading system would best satisfy its trading algorithm and the volume that would potentially be executable at that price

Trading system not covered by first three rows

A hybrid system falling into two or more of the first three rows or a system where the price determination process is of a different nature than that applicable to the types of system covered by first three rows

Adequate information as to the level of orders or quotes and of trading interest; in particular, the five best bid and offer price levels and/or two-way quotes of each market maker in the share, if the characteristics of the price discovery mechanism so permit

[Note: Table 1, Annex II of the MiFID Regulation]

01/11/2007

Publication of pre-trade information

MAR 5.7.4

A regulated market, MTF or systematic internaliser shall be considered to publish pre-trade information on a continuous basis during normal trading hours if that information is published as soon as it becomes available during the normal trading hours of the regulated market, MTF or systematic internaliser concerned, and remains available until it is updated.

Pre-trade information … shall be made available as close to real time as possible. …

[Note: Article 29(1) and (2) of the MiFID Regulation]

01/11/2007

MAR 5.7.5

Information which is required to be made available as close to real time as possible should be made available as close to instantaneously as technically possible, assuming a reasonable level of efficiency and of expenditure on systems on the part of the person concerned. The information should only be published close to the three minute maximum limit in exceptional cases where the systems available do not allow for a publication in a shorter period of time.

[Note: Recital (18) to the MiFID Regulation]

01/11/2007

Disapplication of the pre-trade transparency requirements

MAR 5.7.6

The obligation in MAR 5.7.1 R (1)to make public certain pre-trade information is disapplied in MAR 5.7.1 R (2)based on the market model or the type and size of orders in the cases identified in the MiFID Regulation, and as reproduced for reference in MAR 5.7.8 EU, MAR 5.7.9 EU, MAR 5.7.10 EU and MAR 5.7.11 EU. In particular, the obligation is disapplied in respect of transactions that are large in scale compared with the normal market size for the share or type of share in question.
[Note: Article 29(2) of MiFID and Recital 12 and Articles 18, 19, 20, 33 and 34 of the MiFID Regulation]

01/11/2007

MAR 5.7.7

If granting waivers in relation to pre-trade transparency requirements, or authorising the deferral of post-trade transparency obligations, competent authorities should treat all regulated markets and MTFs equally and in a non-discriminatory manner, so that a waiver or deferral is granted either to all regulated markets and MTFs that they authorise under [the MiFID] Directive 2004/39/EC, or to none. Competent authorities which grant the waivers or deferrals should not impose additional requirements.
[Note: Recital 12 to the MiFID Regulation]

01/11/2007

MAR 5.7.8

Waivers in accordance with Article 29(2) and 44(2) of [the MiFID] Directive 2004/39/EC may be granted by the competent authorities for systems operated by an MTF or a regulated market, if those systems satisfy one of the following criteria:

(a)

they must be based on a trading methodology by which the price is determined in accordance with a reference price generated by another system, where that reference price is widely published and is regarded generally by market participants as a reliable reference price;

(b)

they formalise negotiated transactions, each of which meets the following criteria:

(i)

it is made at or within the current volume weighted spread reflected on the order book or the quotes of the market makers of the regulated market or MTF operating that system or, where the share is not traded continuously, within a percentage of a suitable reference price, being a percentage and a reference price set in advance by the system operator;

(ii)

it is subject to conditions other than the current market price of the share.

For the purposes of point (b), the other conditions specified in the rules of the regulated market or MTF for a transaction of this kind must also have been fulfilled.
In the case of systems having functionality other than as described in points (a) or (b), the waiver shall not apply to that other functionality.

Waivers in accordance with Articles 29(2) and 44(2) of [the MiFID] Directive 2004/39/EC based on the type of orders may be granted only in relation to orders held in an order management facility maintained by the regulated market or the MTF pending their being disclosed to the market.

[Note: Article 18 of the MiFID Regulation]

01/11/2007

MAR 5.7.9

For the purpose of Article 18(1)(b) [of the MiFID Regulation] a negotiated transaction shall mean a transaction involving members or participants of a regulated market or an MTF which is negotiated privately but executed within the regulated market or MTF and where that member or participant in doing so undertakes one of the following tasks:

(a)

dealing on own account with another member or participant who acts for the account of a client;

(b)

dealing with another member or participant, where both are executing orders on own account;

(c)

acting for the account of both the buyer and seller;

(d)

acting for the account of the buyer, where another member or participant acts for the account of the seller;

(e)

trading for own account against a client order.

[Note: Article 19 of the MiFID Regulation]

01/11/2007

MAR 5.7.10

An order shall be considered to be large in scale compared with normal market size if it is equal to or larger than the minimum size of order specified in Table 2 in Annex II [of the MiFID Regulation]. For the purposes of determining whether an order is large in scale compared to normal market size, all shares admitted to trading on a regulated market shall be classified in accordance with their average daily turnover, which shall be calculated in accordance with the procedure set out in Article 33 [of the MiFID Regulation].

[Note: Article 20 of the MiFID Regulation]

01/11/2007

Table 2: Orders large in scale compared with normal market size

MAR 5.7.11

Class in terms of average daily turnover (ADT)

ADT< €500 000

€500 000 ≤ ADT < €1 000 000

€1 000 000 ≤ ADT < €25 000 000

€25 000 000≤ ADT < €50 000 000

ADT ≥ €50 000 000

Minimum size of order qualifying as large in scale compared with normal market size

€50 000

€100 000

€250 000

€400 000

€500 000

[Note: Table 2, Annex II of the MiFID Regulation]

01/11/2007

MAR 5.7.12

The FSA will publish on its website the calculations and estimates for shares admitted to trading on a regulated market, made by the FSA under the provisions in Articles 33 and 34 of the MiFID Regulation.

01/11/2007

MAR 5.8

Provisions common to pre- and post-trade transparency requirements for shares

01/11/2007

MAR 5.8.1

For the purposes of Articles 27, 28, 29, 30, 44 and 45 of [the MiFID] Directive 2004/39/EC and of this [MiFID] Regulation, pre- and post-trade information shall be considered to be made public or available to the public if it is made available generally through one of the following to investors located in the Community:

(a)

the facilities of a regulated market or an MTF;

(b)

the facilities of a third party;

(c)

proprietary arrangements.

[Note: Article 30 of the MiFID Regulation]

01/11/2007

MAR 5.8.2

Any arrangement to make information public, adopted for the purposes of Articles 30 and 31 [of the MiFID Regulation], shall satisfy the following conditions:

(a)

it must include all reasonable steps necessary to ensure that the information to be published is reliable, monitored continuously for errors, and corrected as soon as errors are detected;

(b)

it must facilitate the consolidation of the data with similar data from other sources;

(c)

it must make the information available to the public on a non-discriminatory commercial basis at a reasonable cost.

[Note: Article 32 of the MiFID Regulation]

01/11/2007

MAR 5.8.3

The FSA considers that for the purposes of ensuring that published information is reliable, monitored continuously for errors, and corrected as soon as errors are detected (see MAR 5.8.2 EU(a)), a verification process should be established which does not need to be external from the organisation of the publishing entity, but which should be an independent cross-check of the accuracy of the information generated by the trading process. This process should have the capability to at least identify price and volume anomalies, be systematic and conducted in real-time. The chosen process should be reasonable and proportionate in relation to the business.

01/11/2007

MAR 5.8.4

(1) In respect of arrangements facilitating the consolidation of data as required in MAR 5.8.2 EU(b), the FSA considers information as being made public in accordance with MAR 5.8.2 EU(b), if it:

(a) is accessible by automated electronic means in a machine-readable way;

(b) utilises technology that facilitates consolidation of the data and permits commercially viable usage; and

(2) The FSA considers that an arrangement fulfils the 'machine-readable' criteria where the data

(a) is in a physical form that is designed to be read by a computer;

(b) is in a location on a computer storage device where that location is known in advance by the party wishing to access the data; and

(3) The FSA considers that publication on a non-machine-readable website would not meet the MiFID requirements.

(4) The FSA considers that information that is made public in accordance with MAR 5.8.2 EU should conform to a consistent and structured format based on industry standards. Firms operating an MTF can choose the structure that they use.

01/11/2007

MAR 5.9

Post-trade transparency requirements for shares

01/11/2007

MAR 5.9.1

(1) In respect of shares admitted to trading on a regulated market, unless MAR 5.9.1 R (2) applies and MAR 5.9.7 R is satisfied, a firm operating an MTF must make public, on reasonable commercial terms and as close to real-time as possible, the price, volume and time of the transactions which are advertised through its systems. This requirement does not apply to the details of a transaction executed on an MTF that is made public under the systems of a regulated market.

[Note: Article 30(1) of MiFID]

(2) A firm may defer publication of trade information required in (1) for no longer than the period specified in Table 4 in Annex II of the MiFID Regulation for the class of share and transaction concerned, provided that the following criteria in (a) and (b) are satisfied and subject to the provision in (c):

(a) the transaction is between an investment firm dealing on own account and a client of that firm;

(b) the size of the transaction is equal to or exceeds the relevant minimum qualifying size, as specified in Table 4 in Annex II.

(c) In order to determine the relevant minimum qualifying size for the purposes of point (b), all shares admitted to trading on a regulated market must be classified in accordance with their average daily turnover to be calculated in accordance with Article 33 of the MiFID Regulation.

Note: Table 4 of Annex II of the MiFID Regulation is reproduced in MAR 7 Annex 1 EU.

01/11/2007

MAR 5.9.2

01/11/2007

Post-trade information

MAR 5.9.3

Investment firms, regulated markets and investment firms and market operators operating an MTF shall, with regard to transactions in respect of shares admitted to trading on regulated markets concluded by them or, in the case of regulated markets or MTFs, within their systems, make public the following details:

(a)

the details specified in points 2, 3, 6, 16, 17, 18 and 21 of Table 1 of Annex I [of the MiFID Regulation];

(b)

an indication that the exchange of shares is determined by factors other than the current market valuation of the share, where applicable;

(c)

an indication that the trade was a negotiated trade, where applicable;

(d)

any amendments to previously disclosed information, where applicable.

Those details shall be made public either by reference to each transaction or in a form aggregating the volume and price of all transactions in the same share taking place at the same price at the same time.

[Note: Article 27(1) of the MiFID Regulation]

01/11/2007

Publication of post-trade information

MAR 5.9.4

… post-trade information relating to transactions taking place on trading venues within normal trading hours, shall be made available as close to real time as possible. Post-trade information relating to such transactions shall be made available in any case within three minutes of the relevant transaction.

Information relating to a portfolio trade shall be made available with respect to each constituent transaction as close to real time as possible, having regard to the need to allocate prices to particular shares. Each constituent transaction shall be assessed separately for the purpose of determining whether deferred publication in respect of that transaction is available under Article 28 [of the MiFID Regulation].

Post-trade information relating to transactions taking place on a trading venue but outside its normal trading hours shall be made public before the opening of the next trading day of the trading venue on which the transaction took place.

[Note: Article 29 (2) to (4) of the MiFID Regulation]

01/11/2007

MAR 5.9.5

… A reference to the opening of the trading day shall be a reference to the commencement of the normal trading hours of the trading venue.…

[Note: Article 4(1) of the MiFID Regulation]

01/11/2007

Deferred publication of post-trade information

MAR 5.9.6

The deferred publication of information in respect of transactions may be authorised, for a period no longer than the period specified in Table 4 in Annex II [of the MiFID Regulation] [reproduced in MAR 7 Annex 1 EU] for the class of share and transaction concerned, provided that the following criteria are satisfied:

(a)

the transaction is between an investment firm dealing on own account and a client of that firm;

(b)

the size of the transaction is equal to or exceeds the relevant minimum qualifying size, as specified in Table 4 in Annex II.

In order to determine the relevant minimum qualifying size for the purposes of point (b), all shares admitted to trading on a regulated market shall be classified in accordance with their average daily turnover to be calculated in accordance with Article 33 [of the MiFID Regulation].

[Note: Article 28 of the MiFID Regulation]

01/11/2007

MAR 5.9.6A

The deferred publication of information, referred to in MAR 5.9.6 EU, is authorised by the FSA , to the extent set out in that provision, and, in particular, is given effect in MAR 5.9.1 R (2).

01/11/2007

MAR 5.9.7

An MTF must obtain the prior approval of the FSA to proposed arrangements for deferred post-trade publication and must clearly disclose such arrangements to market participants and the investing public.
[Note: Article 30(2) of MiFID]

01/11/2007

MAR 6

Systematic Internalisers

MAR 6.1

Application

01/11/2007

MAR 6.1.1

Except as regards the reporting requirement in MAR 6.4.1 R, this chapter applies to:

(1) a MiFID investment firm which is a systematic internaliser in shares when dealing in sizes up to standard market size; or

(2) a third country investment firm which is a systematic internaliser in shares when dealing in the United Kingdom in sizes up to standard market size.

01/11/2007

MAR 6.1.2

The systematic internaliser reporting requirement in MAR 6.4.1 R applies to an investment firm which is authorised by the FSA .

01/11/2007

MAR 6.1.3

In this chapter, provisions marked "EU" apply to a third country investment firm which is a systematic internaliser as if they were rules.

01/11/2007

MAR 6.2

Purpose

01/11/2007

MAR 6.2.1

The purpose of this chapter is to implement Article 27 of MiFID, which deals with the requirements on systematic internalisers for pre-trade transparency in shares, the execution of orders on behalf of clients and standards and conditions for trading. It also provides a rule requiring investment firms to notify the FSA when they become, or cease to be, a systematic internaliser, and which gives effect to Article 21(4) of the MiFID Regulation. The chapter sets out for reference other provisions of the MiFID Regulation relevant to the articles being implemented.

01/11/2007

MAR 6.3

Criteria for determining whether an investment firm is a systematic internaliser

01/11/2007

MAR 6.3.1

Where an investment firm deals on own account by executing client orders outside a regulated market or an MTF, it shall be treated as a systematic internaliser if it meets the following criteria indicating that it performs that activity on an organised, frequent and systematic basis:

(a)

the activity has a material commercial role for the firm and is carried on in accordance with non-discretionary rules and procedures;

(b)

the activity is carried on by personnel, or by means of an automated technical system, assigned to that purpose, irrespective of whether those personnel or that system are used exclusively for that purpose;

(c)

the activity is available to clients on a regular or continuous basis.

An investment firm will cease to be a systematic internaliser in one or more shares if it ceases to carry on the activity specified in paragraph 1 in respect of those shares, provided that it has announced in advance that it intends to cease that activity using the same publication channels for that announcement as it uses to publish its quotes or, where that is not possible, using a channel which is equally accessible to its clients and other market participants.

The activity of dealing on own account by executing client orders shall not be treated as performed on an organised, frequent and systematic basis where the following conditions apply:

(a)

the activity is performed on an ad-hoc and irregular bilateral basis with wholesale counterparties as part of business relationships which are themselves characterised by dealings above standard market size;

(b)

the transactions are carried out outside the systems habitually used by the firm concerned for any business that it carries out in the capacity of a systematic internaliser.

[Note: Article 21(1) to (3) of the MiFID Regulation]

01/11/2007

MAR 6.3.2

An activity should be considered as having a material commercial role for an investment firm if the activity is a significant source of revenue, or a significant source of cost. An assessment of significance for these purposes should, in every case, take into account the extent to which the activity is conducted or organised separately, the monetary value of the activity, and its comparative significance by reference both to the overall business of the firm and to its overall activity in the market for the share concerned in which the firm operates. It should be possible to consider an activity to be a significant source of revenue for a firm even if only one or two of the factors mentioned is relevant in a particular case.

[Note: Recital 15 to the MiFID Regulation]

01/11/2007

MAR 6.4

Systematic internaliser reporting requirement

01/11/2007

MAR 6.4.1

An investment firm, which is authorised by the FSA , must promptly notify the FSA in writing of its status as asystematic internaliser in respect of shares admitted to trading on a regulated market:

(1) when it gains that status; or

(2) if it ceases to have that status.

[Note: Article 21(4) of the MiFID Regulation]

01/11/2007

MAR 6.4.2

The notification under MAR 6.4.1 R can be addressed to the firm's usual supervisory contact at the FSA .

01/11/2007

MAR 6.5

Obligations on systematic internalisers in shares to make public firm quotes

01/11/2007

MAR 6.5.1

A systematic internaliser in shares when dealing in sizes up to standard market size must publish a firm quote in relation to any share admitted to trading on a regulated market for which it is:

(1) a systematic internaliser in that share; and

(2) there is a liquid market for that share.

[Note: Subparagraphs 1 and 2 of Article 27(1) of MiFID]

01/11/2007

MAR 6.5.2

Where there is no liquid market for a share, the systematic internaliser must disclose quotes to its clients on request.
[Note: Subparagraph 1 of Article 27(1) of MiFID]

01/11/2007

MAR 6.5.3

A systematic internaliser may:

(1) update a quote at any time; and

(2) under exceptional market conditions, withdraw a quote.

[Note: Subparagraph 1 of Article 27(3) of MiFID]

01/11/2007

MAR 6.6

Size and content of quotes

01/11/2007

MAR 6.6.1

(1) A systematic internaliser may decide the size or sizes at which it will quote.

(2) The quote can be up to standard market size for the class of shares to which the share belongs.

[Note: Subparagraph 3 of Article 27(1) of MiFID]

01/11/2007

MAR 6.6.2

Each quote must include:

(1) a firm bid price; or

(2) a firm offer price;

in respect of each size for which the systematic internaliser quotes.
[Note: Subparagraph 3 of Article 27(1) of MiFID]

01/11/2007

MAR 6.6.3

A systematic internaliser is not obliged to publish firm quotes in relation to transactions above standard market size.[Note: Recital 51 to MiFID]

01/11/2007

MAR 6.7

Prices reflecting prevailing market conditions

01/11/2007

MAR 6.7.1

A firm bid or offer price in respect of a particular share must reflect the prevailing market conditions for that share.
[Note: Subparagraph 3 of Article 27(1) of MiFID]

01/11/2007

MAR 6.7.2

A systematic internaliser shall, for each liquid share for which it is a systematic internaliser, maintain the following:

(a)

a quote or quotes which are close in price to comparable quotes for the same share in other trading venues; and

(b)

a record of its quoted prices, which it shall retain for a period of 12 months or such longer period as it considers appropriate.

The obligation laid down in point (b) is without prejudice to the obligation of the investment firm under Article 25(2) [implemented at SUP 17.4.6 G] of [the MiFID] Directive 2004/39/EC to keep at the disposal of the competent authority for at least 5 years the relevant data relating to all transactions it has carried out.[Note: Article 24 of the MiFID Regulation]

01/11/2007

MAR 6.8

Liquid market for shares, share class, standard market size and relevant market

01/11/2007

MAR 6.8.1

A systematic internaliser will need to refer to the provisions in MAR 6.8.3 EU, MAR 6.8.4 EU, MAR 6.8.5 EU, MAR 6.8.6 EU and MAR 6.8.7 EU and the material the FSA publishes in relation to those provisions to determine:

(1) whether there is a liquid market for a share;

(2) the class to which a share should be allocated;

(3) the standard market size for each class of shares; and

(4) the relevant market for a share.

[Note: Article 27(1), (2) and (7) of MiFID]

01/11/2007

MAR 6.8.2

The FSA will publish on its website the material referred to in MAR 6.8.1 G as regards liquid market for shares, share class, standard market size and the relevant market for a share.

01/11/2007

MAR 6.8.3

Shares not traded daily should not be considered as having a liquid market for the purposes of [the MiFID] Directive 2004/39/EC. However, if, for exceptional reasons, trading in a share is suspended for reasons related to the preservation of an orderly market or force majeure and therefore a share is not traded during some trading days, this should not mean that the share cannot be considered to have a liquid market.

[Note: Recital 16 to the MiFID Regulation]

01/11/2007

MAR 6.8.4

The most relevant market in terms of liquidity for a financial instrument which is admitted to trading on a regulated market, hereinafter "the most relevant market", shall be determined in accordance with paragraphs 2 to 8.

In the case of a share or other transferable security covered by Article 4(1)(18)(a) of [the MiFID] Directive 2004/39/EC or of a unit in a collective investment undertaking, the most relevant market shall be the Member State where the share or the unit was first admitted to trading on a regulated market. ...

Where a financial instrument covered by paragraphs 2 ... was first admitted to trading on more than one regulated market simultaneously, and all those regulated markets share the same home Member State, that Member State shall be the most relevant market.

Where the regulated markets concerned do not share the same home Member State, the most relevant market in terms of liquidity for that instrument shall be the market where the turnover of that instrument is highest.

For the purposes of determining the most relevant market where the turnover of the instrument is highest, each competent authority that has authorised one of the regulated markets concerned shall calculate the turnover for that instrument in its respective market for the previous calendar year, provided that the instrument was admitted to trading at the beginning of that year.

Where the turnover for the relevant financial instrument cannot be calculated by reason of insufficient or non-existent data and the issuer has its registered office in a Member State, the most relevant market shall be the market of the Member State where the registered office of the issuer is situated.

However, where the issuer does not have its registered office in a Member State, the most relevant market for that instrument shall be the market where the turnover of the relevant instrument class is the highest. For the purposes of determining that market, each competent authority that has authorised one of the regulated markets concerned shall calculate the turnover of the instruments of the same class in its respective market for the preceding calendar year.

The relevant classes of financial instrument are the following:

(a)

shares; ...

[Note: Article 9(1),(2) and (8) of the MiFID Regulation]

01/11/2007

MAR 6.8.5

A share admitted to trading on a regulated market shall be considered to have a liquid market if the share is traded daily, with a free float of less than EUR 500 million, and one of the following conditions is satisfied:

(a)

the average daily number of transactions in the share is not less than 500;

(b)

the average daily turnover for the share is not less that EUR 2 million.

However, a Member State may, in respect of shares for which it is the most relevant market, specify by notice that both those conditions are to apply. That notice shall be made public.

A Member State may specify the minimum number of liquid shares for that Member State. The minimum number shall be no greater than five. The specification shall be made public.

Where, pursuant to paragraph 1, a Member State would be the most relevant market for fewer liquid shares than the minimum number specified in accordance with paragraph 2, the competent authority for that Member State may designate one or more additional liquid shares, provided that the total number of shares which are considered in consequence to be liquid shares for which that Member State is the most relevant market does not exceed the minimum number specified by that Member State.

The competent authority shall designate the additional liquid shares successively in decreasing order of average daily turnover from among the shares for which it is the relevant competent authority that are admitted to trading on a regulated market and are traded daily.

For the purposes of the first subparagraph of paragraph 1, the calculation of the free float of a share shall exclude holdings exceeding 5% of the total voting rights of the issuer, unless such a holding is held by a collective investment undertaking or a pension fund.

Voting rights shall be calculated on the basis of all the shares to which voting rights are attached, even if the exercise of such a right is suspended.

A share shall not be considered to have a liquid market for the purposes of Article 27 of [the MiFID] Directive 2004/39/EC until six weeks after its first admission to trading on a regulated market, if the estimate of the total market capitalisation for that share at the start of the first day's trading after that admission, provided in accordance with Article 33(3) [of the MiFID Regulation], is less than EUR 500 million.

Each competent authority shall ensure the maintenance and publication of a list of all liquid shares for which it is the relevant competent authority.

It shall ensure the list is current by reviewing it at least annually.

The list shall be made available to the Committee of European Securities Regulators. It shall be considered as published when it is published by the Committee of European Securities Regulators in accordance with Article 34(5) [of the MiFID Regulation].

[Note: Article 22 of the MiFID Regulation]

01/11/2007

MAR 6.8.6

In order to determine the standard market size for liquid shares, those shares shall be grouped into classes in terms of the average value of orders executed in accordance with Table 3 in Annex II [of the MiFID Regulation].

[Note: Article 23 of the MiFID Regulation]

01/11/2007

MAR 6.8.7

Table 3: Standard market sizes

Class in terms of average value of transactions (AVT)

AVT< €10 000

€10 000 <AVT< €20 000

€20 000 <AVT< €30 000

€30 000 <AVT< €40 000

€40 000 <AVT< €50 000

€50 000 <AVT< €70 000

€70 000 <AVT< €90 000

Etc

Standard market size

€7 500

€15 000

€25 000

€35 000

€45 000

€60 000

€80 000

Etc

[Note: Table 3 of Annex II of the MiFID Regulation]

01/11/2007

MAR 6.8.8

The FSA will publish on its website a link to the calculations and estimates for shares admitted to trading on a regulated market, made by the FSA under the provisions in Articles 33 and 34 of the MiFID Regulation.

01/11/2007

MAR 6.9

Publication of quotes

01/11/2007

MAR 6.9.1

Where a publication obligation arises under MAR 6.5.1 R, a systematic internaliser must make its quotes public:

(1) on a regular and continuous basis during normal trading hours; and

(2) in a manner which is easily accessible to other market participants on a reasonable commercial basis.

[Note: Subparagraphs 1 and 2 of Article 27(3) of MiFID]

01/11/2007

MAR 6.9.2

Pre-trade information, and post-trade information relating to transactions taking place within normal trading hours, shall be made available as close to real time as possible. Post-trade information relating to such transactions shall be made available in any case within three minutes of the relevant transaction.

Information relating to a portfolio trade shall be made available with respect to each constituent transaction as close to real time as possible, having regard to the need to allocate prices to particular shares. Each constituent transaction shall be assessed separately for the purposes of determining whether deferred publication in respect of the transaction is available under Article 28 [of the MiFID Regulation].

[Note: Article 29(1) to (3) of the MiFID Regulation]

01/11/2007

MAR 6.9.3

[Note: Recital 18 to the MiFID Regulation]

01/11/2007

MAR 6.9.4

For the purposes of Articles 27, 28, 29, 30, 44 and 45 of [the MiFID] Directive 2004/39/EC and of this Regulation, pre- and post-trade information shall be considered to have been made public or available to the public if it is made available generally through one of the following to investors located in the Community:

(a)

the facilities of a regulated market or an MTF;

(b)

the facilities of a third party;

(c)

proprietary arrangements.

[Note: Article 30 of the MiFID Regulation]

01/11/2007

MAR 6.9.5

Any arrangement to make information public, adopted for the purposes of Articles 30 and 31 [of the MiFID Regulation] shall satisfy the following conditions:

(a)

it must include all reasonable steps necessary to ensure that the information to be published is reliable, monitored continuously for errors, and corrected as soon as errors are detected;

(b)

it must facilitate the consolidation of the data with similar data from other sources;

(c)

it must make the information available to the public on a non-discriminatory commercial basis at a reasonable cost.

[Note: Article 32 of the MiFID Regulation]

01/11/2007

MAR 6.9.6

For the purposes of ensuring that published information is reliable, monitored continuously for errors, and corrected as soon as errors are detected (see MAR 6.9.5 EU(a)), and in respect of arrangements facilitating the consolidation of data as required in MAR 6.9.5 EU(b), the guidance in MAR 5.8.3 G and MAR 5.8.4 G applies equally to firms falling within this chapter, and should be read as if references to provisions and types of firm in MAR 5 were references to the corresponding provisions and types of firm in this chapter.

01/11/2007

MAR 6.10

Execution price of retail client orders

01/11/2007

MAR 6.10.1

A systematic internaliser must, while complying with the obligation to execute orders on terms most favourable to the client set out in COBS 12.2, execute an order up to standard market size received from a retail client in relation to shares for which it is a systematic internaliser:

(1) at the price quoted at the time of the reception of the order; or

(2) if the order does not match the quotation size or sizes, in compliance with the execution price rules in MAR 6.12.1 R or MAR 6.12.2 R.

[Note: Subparagraphs 3 and 6 of Article 27(3) of MiFID]

01/11/2007

MAR 6.11

Execution price of professional client orders

01/11/2007

MAR 6.11.1

A systematic internaliser may execute an order up to standard market size received from a professional client in relation to shares for which it is a systematic internaliser:

(1) at the price quoted at the time of the reception of the order; or

(2) at a better price for the professional client where:

(a) this price falls within a published range close to market conditions; and

(b) the order is of a size bigger than the size customarily undertaken by a retail investor; or

(3) at a different price which benefits the professional client where:

(a) execution in several securities is part of one transaction; or

(b) the order is subject to conditions other than the current market price.

[Note: Subparagraphs 4 and 5 of Article 27(3) of MiFID]

01/11/2007

MAR 6.11.2

For the purposes of the fourth subparagraph of Article 27(3) of [the MiFID] Directive 2004/39/EC, an order shall be regarded as being of a size bigger than the size customarily undertaken by a retail investor if it exceeds EUR 7 500.

[Note: Article 26 of the MiFID Regulation]

01/11/2007

MAR 6.11.3

For the purposes of the fifth sub-paragraph of Article 27(3) of [the MiFID] Directive 2004/39/EC, execution in several securities shall be regarded as part of one transaction if that one transaction is a portfolio trade that involves 10 or more securities.
For the same purposes, an order subject to conditions other than the current market price means any order which is neither an order for the execution of a transaction in shares at the prevailing market price, nor a limit order.

[Note: Article 25(1) of the MiFID Regulation]

01/11/2007

MAR 6.12

Execution price of client orders not matching quotation sizes

01/11/2007

MAR 6.12.1

Where a systematic internaliser quotes:

(1) in only one quote in a share; or

(2) its highest quote is lower than the standard market size for the class of shares to which the share belongs;

and it receives a client order that is bigger than the quotation size, but lower than the standard market size, the order may be executed, but that part of the order which exceeds the quotation size must either be executed at the quoted price or, if it is a professional client order, as permitted under the execution price provisions in MAR 6.11.1 R.
[Note: Subparagraph 6 of Article 27(3) of MiFID]

01/11/2007

MAR 6.12.2

Where a systematic internaliser quotes in different sizes and it receives a client order between those sizes, the order may be executed:

(1) at one of the quoted prices in compliance with the client order handling rules set out in COBS 12.3, COBS 12.4.1R and COBS 12.4.5R; or

(2) if it is a professional client order, as permitted under the execution price provisions in MAR 6.11.1 R.

[Note: Subparagraph 6 of Article 27(3) of MiFID]

01/11/2007

MAR 6.13

Standards and conditions for trading

01/11/2007

MAR 6.13.1

A systematic internaliser must have clear standards which set out and govern the basis on which it will decide which investors are given access to its quotes. The standards must operate:

(1) in an objective, non-discriminatory way within the categories of retail and professional clients; and

(2) on the basis of its commercial policy, including considerations such as:

(a) investor credit status;

(b) counterparty risk; and

and a systematic internaliser may refuse to enter into or discontinue business relationships with investors on this policy basis.

[Note: Recital 50 and Article 27(5) of MiFID]

01/11/2007

MAR 6.13.2

Systematic internalisers might decide to give access to their quotes only to retail clients, only to professional clients, or to both. They should not be allowed to discriminate within those categories of clients.
[Note: Recital 50 to MiFID]

01/11/2007

MAR 6.14

Limiting risk of exposure to multiple transactions

01/11/2007

MAR 6.14.1

A systematic internaliser may limit the number of transactions from the same client that it undertakes to enter at the published quote, provided it does so in a non-discriminatory way within the categories of retail and professional clients.
[Note: Recital 50 and Article 27(6) of MiFID]

01/11/2007

MAR 6.14.2

A systematic internaliser may limit the total number of transactions from different clients at the same time that it undertakes to enter at the published quote, provided that it does so:

(1) in a non-discriminatory way within the categories of retail and professional clients;

(2) in accordance with the provisions of the client order handling rules set out in COBS 12.3, COBS 12.4.1 R and COBS 12.4.5 R; and

(3) that the number or volume of orders sought by clients considerably exceeds the norm.

[Note: Recital 50 and Article 27(6) of MiFID]

01/11/2007

MAR 6.14.3

For the purposes of Article 27(6) of [the MiFID] Directive 2004/39/EC, the number or volume of orders shall be regarded as considerably exceeding the norm if a systematic internaliser cannot execute those orders without exposing itself to undue risk.

In order to identify the number and volume of orders that it can execute without exposing itself to undue risk, a systematic internaliser shall maintain and implement as part of its risk management policy under Article 7 of Commission Directive 2006/73/EC [the MiFID implementing Directive] a non-discriminatory policy which takes into account the volume of the transactions, the capital that the firm has available to cover the risk for that type of trade, and the prevailing conditions in the market in which the firm is operating.

Where, in accordance with Article 27(6) of [the MiFID] Directive 2004/39/EC, an investment firm limits the number or volume of orders it undertakes to execute, it shall set out in writing, and make available to clients and potential clients, the arrangements designed to ensure that such a limitation does not result in the discriminatory treatment of clients.

[Note: Article 25(2) and (3) of the MiFID Regulation]

01/11/2007

MAR 7

Disclosure of information on certain trades undertaken outside a regulated market or MTF

MAR 7.1

Application

01/11/2007

Who?

MAR 7.1.1

This chapter applies to:

(1) a MiFID investment firm; and to

(2) a third country investment firm.

01/11/2007

What?

MAR 7.1.2

A firm, which, either on its own account or on behalf of clients, concludes transactions in shares admitted to trading on a regulated market outside a regulated market or MTF, must make public the volume and price of those transactions and the time at which they were concluded.
[Note: article 28(1) of MiFID]

01/11/2007

Where?

MAR 7.1.3

This chapter applies in respect of transactions in shares (which are admitted to trading on a regulated market) executed in the United Kingdom.

01/11/2007

MAR 7.1.4

Article 32 (7) of MiFID provides that the competent authority of the Member State in which a branch is located shall assume responsibility for ensuring that the services provided by the branch within its territory comply with the obligations under Article 28.

01/11/2007

Status of EU provisions as rules in certain instances

MAR 7.1.5

In this chapter, paragraphs marked "EU", including MAR 7 Annex 1 EU, shall apply to a third country investment firm as if those provisions were rules.

01/11/2007

MAR 7.2

Making post-trade information public

01/11/2007

Publication of information

MAR 7.2.1

(1) Unless (2) applies, the information required by MAR 7.1.2 R shall be made public as close to real-time as possible, on a reasonable commercial basis, and in a manner which is easily accessible to other market participants.
[Note: article 28(1) of MiFID]

(2) A firm may defer publication of trade information required in (1), for no longer than the period specified in Table 4 in Annex II of the MiFID Regulation for the class of share and transaction concerned, provided that the criteria in (a) and (b) are satisfied, subject to the provision in (c):

(a) the transaction is between an investment firm dealing on own account and a client of that firm;

(b) the size of the transaction is equal to or exceeds the relevant minimum qualifying size, as specified in Table 4 in Annex II.

(c) In order to determine the relevant minimum qualifying size for the purposes of (b), all shares admitted to trading on a regulated market must be classified in accordance with their average daily turnover to be calculated in accordance with Article 33 of the MiFID Regulation.
[Note: Table 4 of Annex II of the MiFID Regulation is reproduced in MAR 7 Annex 1 EU.]

01/11/2007

MAR 7.2.2

Details of information to be made public

A firm ... shall, with regard to transactions in respect of shares admitted to trading on regulated markets concluded by them ... make public the following details:

(a)

the details specified in points 2, 3, 6, 16, 17, 18 and 21 of Annex I [of the MiFID Regulation];

(b)

an indication that the exchange of shares is determined by factors other than the current market valuation of the share, where applicable;

(c)

an indication that the trade was a negotiated trade, where applicable;

(d)

any amendments to previously disclosed information, where applicable.

Those details shall be made public either by reference to each transaction or in a form aggregating the volume and price of all transactions in the same share taking place at the same time.

[Note: article 27(1) of the MiFID Regulation]

01/11/2007

Information requirements specific to systematic internalisers

MAR 7.2.3

By way of exception, a systematic internaliser shall be entitled to use the acronym 'SI' instead of the venue identification referred to in MAR 7.2.2 EU (a) in respect of a transaction in a share that is executed in its capacity as a systematic internaliser in respect of that share.
The systematic internaliser may exercise that right only as long as it makes available to the public aggregate quarterly data as to the transactions executed in its capacity as a systematic internaliser in respect of that share relating to the most recent calendar quarter, or part of a calendar quarter, during which the firm acted as a systematic internaliser in respect of that share. That data shall be made available no later than one month after the end of each calendar quarter.
It may also exercise that right during the period between 1 November 2007, or the date on which the firm commences to be a systematic internaliser in relation to a share, whichever is the later, and the date that aggregate quarterly data in relation to a share is first due to be published.

[Note: article 27(2) of the MiFID Regulation. The date, '1 November 2007', is specified in article 41(2) of the MiFID Regulation]

01/11/2007

MAR 7.2.4

The aggregated quarterly data referred to in the second subparagraph of MAR 7.2.3 EU shall contain the following information for the share in respect of each trading day of the calendar quarter concerned:

(a)

the highest price;

(b)

the lowest price;

(c)

the average price;

(d)

the total number of shares traded;

(e)

the total number of transactions;

(f)

such other information as the systematic internaliser decides to make available.

[Note: article 27(3) of the MiFID Regulation]

01/11/2007

MAR 7.2.5

Arrangements between firms for making information public

Where the transaction is executed outside the rules of a regulated market or an MTF, one of the following ... firms shall, by agreement between the parties, arrange to make the information public:

(a)

the firm that sells the share concerned;

(b)

the firm that acts on behalf of or arranges the transaction for the seller;

(c)

the firm that acts on behalf of or arranges the transaction for the buyer;

(d)

the firm that buys the share concerned.

In the absence of such an agreement, the information shall be made public by the firm determined by proceeding sequentially from point (a) to point (d) until the first point that applies to the case in question.
The parties shall take all reasonable steps to ensure that the transaction is made public as a single transaction. For those purposes two matching trades entered at the same time with a single party interposed shall be considered to be a single transaction.

[Note: article 27(4) of the MiFID Regulation]

01/11/2007

MAR 7.2.6

Deferred publication of large transactions

The deferred publication of information in respect of transactions may be authorised, for a period no longer than the period specified in MAR 7 Annex 1 EU for the class of share and transaction concerned, provided that the following criteria are satisfied:

(a)

the transaction is between an investment firm dealing on own account and a client of that firm;

(b)

the size of the transaction is equal to or exceeds the relevant minimum qualifying size, as specified in MAR 7 Annex 1 EU.

[Note: article 28 of the MiFID Regulation]

01/11/2007

MAR 7.2.6A

The deferred publication of information, referred to in MAR 7.2.6 EU, is authorised by the FSA , to the extent set out in that provision, and, in particular, is given effect in MAR 7.2.1 R (2).

01/11/2007

MAR 7.2.7

Publication and availability of post trade transparency data

Post-trade information relating to transactions taking place on trading venues and within normal trading hours, shall be made available as close to real time as possible. Post-trade information relating to such transactions shall be made available in any case within three minutes of the relevant transaction.

[Note: article 29(2) of the MiFID Regulation]

01/11/2007

MAR 7.2.8

Information relating to a portfolio trade shall be made available with respect to each constituent transaction as close to real time as possible, having regard to the need to allocate prices to particular shares. Each constituent transaction shall be assessed separately for the purposes of determining whether deferred publication in respect of that transaction is available under MAR 7.2.6 EU.

[Note: article 29(3) of the MiFID Regulation]

01/11/2007

MAR 7.2.9

[Note: article 29(4) of the MiFID Regulation]

01/11/2007

MAR 7.2.10

For transactions that take place outside a trading venue, post-trade information shall be made public:

(a)

if the transaction takes place during a trading day of the most relevant market for the share concerned, or during the firm's normal trading hours, as close to real time as possible. Post-trade information relating to such transactions shall be made available in any case within three minutes of the relevant transaction;

(b)

in a case not covered by point (a), immediately upon the commencement of the firm's normal trading hours or at the latest before the opening of the next trading day in the most relevant market for that share.

[Note: article 29(5) of the MiFID Regulation]

01/11/2007

MAR 7.2.11

Public availability of post-trade information

For the purposes of MAR 7, post-trade information shall be considered to be made public or available to the public if it is made available generally through one of the following to investors located in the Community:

(a)

the facilities of a regulated market or an MTF;

(b)

the facilities of a third party;

(c)

proprietary arrangements.

[Note: article 30 of the MiFID Regulation]

01/11/2007

MAR 7.2.12

Arrangements for making information public

Any arrangement to make information public, adopted for the purposes of MAR 7.2.11 EU, shall satisfy the following conditions:

(a)

it must include all reasonable steps necessary to ensure that the information to be published is reliable, monitored continuously for errors, and corrected as soon as errors are detected;

(b)

it must facilitate the consolidation of the data with similar data from other sources;

(c)

it must make the information available to the public on a non-discriminatory commercial basis at a reasonable cost.

[Note: article 32 of the MiFID Regulation]

01/11/2007

MAR 7.2.12A

(1) The FSA considers that for the purposes of ensuring that published information is reliable, monitored continuously for errors, and corrected as soon as errors are detected (see MAR 7.2.12 EU(a)), and in respect of arrangements facilitating the consolidation of data as required in MAR 7.2.12 EU(b), the guidance in MAR 5.8.3 G and MAR 5.8.4 G (subject to additional guidance in (2)) applies equally to firms falling within this chapter, and should be read as if references to provisions and types of firm in MAR 5 were references to the corresponding provisions and types of firm in this chapter.

(2) In addition to MAR 5.8.4 G, as applied to firms in this chapter under (1), for the purposes of facilitating the consolidation of transparency data with similar data from other sources, the FSA considers information as being made public in accordance with MAR 7.2.12 EU(b), if, in addition to MAR 5.8.4 G (1)(a) to (c), each trade is published through only one primary publication channel.

01/11/2007

Publication of results of calculations and estimates made by the FSA

MAR 7.2.13

The information relating to 'minimum qualifying size' referred to in Article 28 of the MiFID Regulation (see MAR 7.2.6 EU) and the results of calculations and estimates required to be published as a result of Articles 33 and 34 of the MiFID Regulation are availableat www.fsa.gov.uk and at www.cesr-eu.org .

01/11/2007

Trade Data Monitors

MAR 7.2.14

The FSA considers that a firm will satisfy its obligations under MAR 7.2.12 EUif:

(1) in assessing the arrangements, the firm follows the guidelines published on the FSA's website at www.fsa.gov.uk/Pages/About/What/International/mifid/documents/index.shtml ; and

(2) it has been confirmed that the arrangements will enable the firm to comply with the guidelines through either:

(a) a statement by the FSA ; or

(b) a report by an external auditor to the provider of the arrangements which is made available to firms and, on request, to the FSA .

A "trade data monitor" is a provider of such arrangements which has been assessed by the FSA or an external auditor as having the capability to provide services and facilities to firms in accordance with the guidelines published on the FSA's website at www.fsa.gov.uk/Pages/About/What/International/mifid/documents/index.shtml .

Use of a trade data monitor does not affect a firm's obligations under MAR 7.2.10 EU regarding the timing of the disclosure of post-trade information.

01/11/2007

MAR 7 Annex 1

Deferred publication thresholds and delays

01/11/2007

Table 4: Deferred publication thresholds and delays
The table below shows, for each permitted delay for publication and each class of shares in terms of average daily turnover (ADT), the minimum qualifying size of transaction that will qualify for that delay in respect of a share of that type.

Class of shares in terms of average daily turnover (ADT)

ADT < €100 000

€100 000 ≤ ADT < €1 000 000

€1 000 000 ≤ ADT < €50 000 000

ADT ≥ €50 000 000

Minimum qualifying size of transaction for permitted delay

Permitted delay for publication

60 minutes

€10 000

Greater of 5% of ADT and €25 000

Lower of 10% of ADT and €3 500 000

Lower of 10% of ADT and €7 500 000

180 minutes

€25 000

Greater of 15% of ADT and €75 000

Lower of 15% of ADT and €5 000 000

Lower of 20% of ADT and €15 000 000

Until end of trading day (or roll-over to noon of next trading day if trade undertaken in final 2 hours of trading day)

€45 000

Greater of 25% of ADT and €100 000

Lower of 25% of ADT and €10 000 000

Lower of 30% of ADT and €30 000 000

Until end of trading day next after trade

€60 000

Greater of 50% of ADT and €100 000

Greater of 50% of ADT and €1 000 000

100% of ADT

Until end of second trading day next after trade

€80 000

100% of ADT

250% of ADT

Until end of third trading day next after trade

250% of ADT

01/11/2007

Transitional Provisions and Schedules

MAR TP 1

Transitional Provisions

MAR TP 1.1

GEN contains some technical transitional provisions that apply throughout the Handbook and which are designed to ensure a smooth transition at commencement. These include transitional provisions relevant to record keeping and notification rules.

1) Transitional Provisions for The Code of Market Conduct - ( MAR 1)

There are no transitional provisions for The Code of Market Conduct (The Code of Market Conduct).

2) Transitional Provisions for Price stabilising rules ( Price Stabilising Rules )

SUP contains transitional provisions which carry forward into MAR 2 (Price stabilising rules) written concessions relating to pre-commencement provisions.

3) Transitional provisions for MAR 6 (systematic internaliser reporting requirements)

A provision giving effect to Article 21 (4) of the MiFID Regulation as regards creating the initial list of all systematic internalisers.

MAR TP 1.2

(1)

(2) Material provision to which transition al provision applies

(3)

(4) Transitional provision

(5) Transitional provision: dates in force

(6) Handbook provision: coming into force

MAR 2

Expired

MAR 6

An investment firm, which is authorised by the FSA, must notify the FSA in writing by 1 December 2007 if at 1 November 2007 it is a systematic internaliser in respect of shares admitted to trading on a regulated market.

From 1 November 2007 to 2 December 2007

1 November 2007

01/11/2007

MAR Sch 1

Record Keeping requirements

01/12/2004

MAR Sch 1.1

Handbook reference

Subject of record

Contents of record

When record must be made

Retention period

MAR 2.7R

Price stabilising action

Full details as noted in MAR 2.7.2 R

On initiation of stabilising action

3 years

MAR 3.5.4

Non Market Price Transactions

Details of steps taken in consideration of NMPTs

On considering the transaction

3 years

01/12/2004

MAR Sch 2

Notification requirements

01/12/2004

MAR Sch 2.1

There are no notification requirements in MAR .

01/12/2004

MAR Sch 3

Fees and other required payments

01/12/2004

MAR Sch 3.1

There are no requirements for fees or other payments in MAR.

01/12/2004

MAR Sch 4

Powers Exercised

01/12/2004

MAR Sch 4.1

The following powers in the Act have been exercised by the FSA to make the rules in MAR:

Section 118(8) (Market abuse)

Section 138 (General rule-making power)

Section 143 (Endorsement of codes etc.)

Section 144 (Price stabilising rules)

Section 145 (Financial promotion rules)

Section 149 (Evidential provisions)

Section 150(2) (Actions for damages)

Section 156 (General supplementary powers)

01/12/2004

MAR Sch 4.2

The following powers in the Act have been exercised by the FSA to give the guidance in MAR (including the guidance comprising of the Code of Market Conduct):

Section 119 (The code)

Section 120 (Provisions included in the Authority's code by reference to the City Code)

Section 157(1) (Guidance)

01/12/2004

MAR Sch 5

Rights of action for damages

01/12/2004

MAR Sch 5.1

The table below sets out the rules in MAR contravention of which by an authorised person may be actionable under section 150 of the Act (Actions for damages) by a person who suffers loss as a result of the contravention.

If a "yes" appears in the column headed "For private person?", the rule may be actionable by a " private person " under section 150 unless a "yes" appears in the column headed "Removed". A "yes" in the column headed "Removed" indicates that the FSA has removed the right of action under section 150(2) of the Act . If so, a reference to the rule in which it is removed is also given.

In accordance with the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001 (SI 2001/2256), a "private person" is:

any individual, except when acting in the course of carrying on a regulated activity; and

ii.

any person who is not an individual, except when acting in the course of carrying on business of any kind;but does not include a government, a local authority or an international organisation.

The column headed "For other person?" indicates whether the rule is actionable by a person other than a private person , in accordance with those Regulations. If so, an indication of the type of person by whom the rule is actionable is given.

01/12/2004

MAR Sch 5.2

Chapter / Appendix

Section / Annex

Paragraph

For Private Person?

Removed

For other person?

MAR 1 (no rules)

All rules in MAR 2 except MAR 2.3.3 R and MAR 2.3.4 EU

Yes

Yes MAR 2.1.9 R

MAR 2.3.3 R, MAR 2.3.4 EU and MAR 2.3.5 EU

All rules in MAR 3 except MAR 3.5.7 E

Yes

Yes MAR 3.1.5 R

MAR 3.5.7 E

MAR 4 (all rules)

Yes

01/12/2004

MAR Sch 6

Rules that can be waived

01/12/2004

MAR Sch 6.1

The rules in MAR can be waived by the FSA under section 148 of the Act (Modification or waiver of rules), except for:
MAR 2.1.1 R (2)(Application)
MAR 2.1.9 R (Actions for damages)
MAR 3.1.5 R(Actions for damages)

01/12/2004