Act on Securities Trading (Securities Trading Act)

Part 3. Investment firms

Chapter 9. Application and conditions for authorisation

III. Special requirements applicable to MTFs and OTFs

Section 9-26.The trading process and finalisation of transactions in MTFs and OTFs
(1) The operator of an MTF or an OTF shall:
1.have transparent rules and procedures for fair and orderly trading, and establish objective criteria for the efficient execution of orders, and have arrangements for the sound management of the technical operation of the facility, including contingency plans and systems to cope with the risk of systems disruption,
2.have transparent and duly published rules on which financial instruments can be traded under the system, and ensure access to sufficient publicly available information to enable users to make an informed investment judgement, taking into account the nature of the user and the type of financial instrument,
3.have transparent and non-discriminatory rules, based on objective criteria, governing access to its facility,
4.have arrangements to identify and manage potential adverse consequences for the operation of the facility or for its participants or users, of any conflicts of interest between, on the one hand, the facility, the operator or its owners and, on the other hand, the sound functioning of the facility,
5.comply with the requirements of sections 11-19 to 11-24 and section 11-26, and have in place all necessary systems, procedures and arrangements to do so,
6.clearly inform its participants of their responsibility for settlement and ensure the facilitation of efficient and punctual settlement of transactions executed under the trading system of the facility,
7.have at least three active users or participants that can participate in price formation,
8.immediately comply with any order from Finanstilsynet to suspend or remove a financial instrument from trading; see section 9-30.
(2) Where a transferable security that has been admitted to trading on a regulated market is traded on an MTF or an OTF without the issuer’s consent, the issuer shall not be subject to any disclosure obligation as the result of the trading on such facility.
(3) An MTF and an OTF shall upon application for authorisation provide Finanstilsynet with a detailed description of the functioning of the facility, including any links to or participation by a regulated market, another multilateral trading facility or organised trading facility or a systematic internaliser owned by the operator, and a list of their participants and users.
(4) The ministry may make regulations to supplement this section.
Section 9-27.Specific requirements for MTFs
(1) The operator of an MTF shall have in place non-discretionary trading rules for the execution of orders under the facility's systems.
(2) The provisions of section 9-26 subsection (1) no. 3 on access to the facility shall be in accordance with section 12-4 subsection (3).
(3) The operator of an MTF shall:
1.take necessary steps to manage the risks to which the facility is exposed, establish appropriate arrangements and systems to identify all significant risks to its operation and put in place effective measures to mitigate those risks,
2.ensure the facilitation of efficient and timely finalisation of transactions executed under the facility's systems,
3.at all times have access to sufficient financial resources to facilitate the sound functioning of the facility, having regard to the nature and extent of transactions executed on the facility, and the range and degree of the risks to which the facility is exposed.
(4) The requirements of sections 10-9 to 10-18, section 10-19, section 10-20 subsection (1) and section 10-21 shall not apply to transactions concluded between the participants of the MTF, or between the facility and its participants, under the rules governing such facility and when using the facility's systems. The requirements of sections 10-9 to 10-21 shall nonetheless apply to the participants' clients when they execute, on behalf of clients, orders via the MTF.
(5) The operator of an MTF may not execute orders against proprietary capital or by matched principal trading. ‘Matched principal trading’ means a transaction where the facilitator of the transaction interposes itself between the buyer and the seller and executes both sides of the transaction simultaneously without exposing itself to market risk, and where the pricing of the transaction is such that the facilitator makes no profit or loss, other than an agreed commission, fee or charge for the transaction.
(6) The ministry may make regulations to supplement this section.
Section 9-28.Specific requirements for OTFs
(1) The operator of an OTF shall take necessary steps to prevent the execution of orders placed on the facility against the operator's proprietary capital or against the holdings of a company in the same group.
(2) The operator of an OTF may execute orders by matched principal trading, see section 9-27 subsection (5), in bonds, structured finance products, emission allowances and derivatives that are not subject to a clearing obligation under EMIR Article 5 as implemented in section 17-1, provided that the client consents thereto. The operator shall establish arrangements ensuring compliance with the definition of matched principal trading; see section 9-27 subsection (5).
(3) The operator of an OTF may only engage in dealing on own account other than matched principal trading, see section 9-27 subsection (5), in government bonds for which there is not a liquid market.
(4) ‘Liquid market’ means a market for a financial instrument or a class of financial instruments, where there are ready and willing buyers at all times. In the assessment of whether a market is liquid, specific market structures for each financial instrument or each class of financial instruments shall be taken into consideration, and the assessment shall be based on the following criteria:
1.the average frequency and size of transactions over a range of market conditions, having regard to the nature and lifecycle of the products within the class of financial instruments concerned,
2.the number and type of market participants, including the ratio of market participants to traded instruments in a particular product, and
3.the average bid-ask spread, where available.
(5) An OTF and a systematic internaliser may not be operated in the same legal entity. Nor may an OTF connect with a systematic internaliser in a way which allows orders in the facility and orders or quotes in the systematic internaliser to be matched. An OTF may not connect with another organised trading facility in a way which allows orders in the two facilities to be matched.
(6) The operator of an OTF shall exercise discretion only in either or both of the following circumstances:
1.when deciding to place or retract an order on the facility,
2.when deciding not to match a specific client order with other orders available in the facility's systems at a given time, provided it is in accordance with instructions received from the client and in accordance with its obligations under sections 10-19 and 10-20.
(7) The operator of an OTF may decide if, when and how much of two or more orders to match in the system. The operator may facilitate negotiation between two clients with a view to bringing about a transaction.
(8) Finanstilsynet may require the operator of an OTF, either in connection with the application for authorisation or whenever needed, to provide a detailed explanation of why the trading system of the facility is not considered a regulated market, an MTF or a systematic internaliser. A detailed description shall be provided as to how discretion will be exercised, including when an order will be retracted and when and how two or more orders will be matched within the facility. In addition, the operator shall provide information on its use of matched principal trading.
(9) The ministry may make regulations to supplement this section.
Section 9-29.Monitoring of compliance with the rules of MTFs and OTFs
(1) The operator of an MTF or an OTF shall establish effective arrangements and procedures to ensure regular monitoring of users' compliance with the facility's own rules. The operator of the facility shall monitor orders sent, cancellations of orders and transactions undertaken under the facility’s systems in order to identify infringements of relevant laws and rules, including the market abuse provisions in chapter 3, the facility's own rules and other disorderly trading conditions, as well as system disruptions in relation to a financial instrument. The operator of the facility shall deploy the resources necessary to ensure that the monitoring is effective.
(2) The operator of an MTF or an OTF shall immediately notify Finanstilsynet of any suspicion of significant infringements of relevant laws and rules, including the market abuse provisions in chapter 3, the facility's own rules and other unlawful trading conditions, as well as trading system disruptions in relation to a financial instrument.
(3) The operator of an MTF or an OTF shall assist Finanstilsynet in case of any suspicion of market abuse; see chapter 3. The assistance shall be provided at no cost to Finanstilsynet.
(4) The ministry may make regulations to supplement this section.
Section 9-30.Suspension and removal of financial instruments from trading
(1) The operator of an MTF or organised trading facility may suspend or remove from trading on the facility a financial instrument which no longer complies with the facility's conditions or rules. However, this shall not apply if suspension or removal of the instrument would be likely to cause significant detriment to the holders of the instrument or the facility's tasks and functioning.
(2) Upon suspension or removal of a financial instrument, the operator of the MTF or organised trading facility shall also suspend or remove any derivatives that have the relevant financial instrument as underlying where necessary to support the intention behind the suspension or removal of the underlying financial instrument.
(3) Anyone suspending or removing a financial instrument from trading shall immediately publish the decision and inform Finanstilsynet accordingly.
(4) Finanstilsynet shall require marketplaces and systematic internalisers which trade the relevant financial instrument to suspend or remove the instrument from trading, where the suspension or removal is grounded in a takeover bid, suspected market abuse or the non-disclosure of inside information about the issuer or the financial instrument infringing Articles 7 and 17 of the Market Abuse Regulation, see section 3-1, except where this may cause significant detriment to the holders of the instrument or the functioning of the facility. Finanstilsynet shall immediately publish the decision and inform the European Securities and Markets Authority and relevant supervisory authorities in other EEA states accordingly.
(5) Finanstilsynet may decide that the operator of an MTF or an OTF shall suspend or remove a financial instrument from trading on the facility pursuant to subsections (1) and (2) if it no longer complies with the conditions for admission to trading.
(6) The ministry may make regulations to supplement this section.
Section 9-30a.Case processing etc.

The ministry may by regulations make provisions to the effect that section 11-13, section 12-2 subsection (7) and section 12-4 subsection (8) shall in whole or in part apply in adapted form to operators of MTFs and OTFs. The ministry may by regulations make provisions concerning case processing in respect of decisions taken by operators of MTFs and OTFs and provisions concerning appeals against and reversal of such decisions.