MAR Market Conduct

Part

MAR Market Conduct

Printed on: 15/10/2024

Rulebook at: 01/07/2006

Chapters

MAR 1 The Code of Market Conduct
MAR 2 Stabilisation
MAR 3 Inter-Professional
Conduct
MAR 4 Endorsement of the Takeover Code
MAR 5 Alternative Trading Systems
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 ENF 14.

01/07/2005

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 COB or MAR 3, 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.

01/07/2005

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.

01/07/2005

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 SARs(or theirequivalents 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).

01/07/2005

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

Descriptions of behaviour that do not amount to market abuse (manipulating transactions): accepted market practices

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

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

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 section 198 of the Companies Act 1985);
(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.

01/07/2005

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) COB 2.4.4 R (1) (Chinese walls) (see COB 2.4.4 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).

01/07/2005

Takeover Code and SARs

MAR 1.10.3

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

01/07/2005

MAR 1.10.4

Behaviour conforming with any of the rules of the Takeover Code or SARs 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.

01/07/2005

MAR 1.10.5

Table: Provisions of the Takeover Code or SARs 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

SAR provisions:

Timing of disclosure

3
4.1(a) and (e), 4.3, 4.4

Content of announcements

4.2

01/07/2005

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.

Table: Part 2 - Accepted Market Practices: Market aberrations on the London Metal Exchange

Description of the AMP:

Behaviour conforming with the metal market aberrations regime.

Rationale for why the practice would constitute manipulation

Behaviour which gives rise to the application of the metal market aberrations regime may involve transactions or orders to trade which:

(i)

give or are likely to give, false or misleading signals as to the supply of or demand for or price of financial instruments;

(ii)

secure, by a person or persons acting in collaboration, the price of one or several financial instruments at an abnormal or artificial level.

List of Factors

The following factors were taken into account by the FSA when assessing behaviour conforming with the metal market aberrations regime as an accepted market practice:

The level of transparency (to the rest of the market) of the practice in question

The metal market aberrations regime has been published to the market by the Exchange on which it applies. The transparency criterion is therefore met. Those who have long positions at or above the thresholds specified in the metal market aberrations regime are required to advertise to the market that they will be prepared to lend stock.

The need to safeguard the operation of market forces and the proper interplay of the forces of supply and demand

The metal market aberrations regime is designed to facilitate the operation of supply and demand on the market by avoiding abusive squeezes or other circumstances which could result in or involve distortion of the market for the investment in question.

The impact on market liquidity and efficiency

The practice has a positive effect on market liquidity and efficiency as it facilitates the orderly operation of a market in which a participant has a dominant long position.

The degree to which the 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 the practice

The metal market aberrations regime was developed taking into account the trading mechanism of the LME. The behaviour required of long position holders under the metal market aberrations regime is monitored by the LME compliance department on a daily basis using public and confidential regulatory information available to it. The LME compliance department takes into account the trading mechanism of the LME when performing this task. Procedures exist for escalating any concerns about market circumstances to a Special Committee that is able to intervene in order to enable market participants to react properly and in a timely manner to any new market situations created by the practices.

The risk inherent in the practice for the integrity of directly or indirectly related markets in the financial instrument, including any market in the financial instrument which exists on an exchange (or other trading venue) and related markets in directly related financial instruments

The metal market aberrations regime was developed to maintain the integrity of the markets in financial instruments traded in the LME. The regime has been shown to be an aid in maintaining the integrity of those markets.

The outcome of any investigation of the practice by any regulatory body, including the extent to which a practice breaches existing rules or regulations designed to prevent market manipulation on the market in question or on directly or indirectly related markets in the EU

The FSA supports the metal market aberrations regime and, under the previous Code of Market Conduct applying to trading on the LME, provided a safe harbour for behaviour in conformity with the metal market aberrations regime.

The structure characteristics of the market in question including whether it is a regulated or OTC market, the type(s) of financial instrument traded on the market and the type of market participants, including the extent of retail participation in the market;

The London Metal Exchange is a commodity derivatives market which has Recognised Investment Exchange status in the UK. It is a professional market with minimal retail involvement.

Overriding Principles

The FSA had regard to the following overriding principles to ensure that the metal market aberrations regime does not undermine market integrity, while fostering innovation and the continued dynamic development of financial markets:

new or emerging market practices were not be assumed to be unacceptable simply because they had not been previously described as acceptable by the FSA;

the need to safeguard the operation of market forces and the interplay of proper supply and demand;

the need for market participants to operate fairly and efficiently without interfering in normal market activity.

Conditions relating to legitimate reasons and proper execution

The metal market aberrations regime specifies the behaviour required in the circumstances where it is triggered and conduct in conformity with the metal market aberrations regime is for legitimate reasons.

06/04/2006

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 3

Inter-Professional
Conduct

MAR 3.1

Application

01/12/2004

APPLICATION: WHO?

MAR 3.1.1

This chapter applies to every firm except:

(1) a service company, unless the service company is an ATS operator, in which case, MAR 3.4.10 G and MAR 3.4.10A G apply to the service company in relation to the operation of the ATS;

(2) a non-directive friendly society;

(3) a non-directive insurer;

(4) a UCITS qualifier.

01/04/2004

APPLICATION: WHAT?

MAR 3.1.2

This chapter applies to a firm:

(1) when it carries on:

(a) regulated activities; or
(b) related ancillary activities;

(2) to the extent that the regulated activity the firm is carrying on is:

(a) dealing in investments as principal; or
(b) dealing in investments as agent; or
(c) acting as an arranger; or
(d) giving transaction-specific advice;

(3) but only if the activity referred to in (1) and (2) is in or is in respect of an inter-professional investment and is undertaken with or for a market counterparty.

01/12/2001

MAR 3.1.2A

In MAR 3.1.2 R, the exclusion in article 15 of the Regulated Activities Order (Absence of holding out etc) is to be disregarded in determining whether dealing in investments as principal (or agreeing to do so) is a regulated activity.

01/05/2003

MAR 3.1.3

This chapter does not apply to the carrying on of the following activities:

(1) the approval by a firm of a financial promotion; or

(2) activities carried on between operators, or between operators and depositories, of the same collective investment scheme (when acting in that capacity); or

(3) corporate finance business;

(4) safeguarding and administering investments and agreeing to carry on that regulated activity; or

(5) concluding a distance contract with a retail customer.

09/10/2004

APPLICATION: WHERE?

MAR 3.1.4

This chapter applies only with respect to a firm's activities carried on from an establishment maintained by the firm in the United Kingdom.

01/12/2001

RIGHTS OF ACTION FOR DAMAGES

MAR 3.1.5

A contravention of the rules in MAR 3 does not give rise to a right of action by a private person under section 150 of the Act (and each of the rules in this instrument is specified under section 150(2) of the Act as a provision giving rise to no such right of action).

20/09/2001

MAR 3.2

Purpose

01/12/2004

MAR 3.2.1

The main objective of this chapter (MAR 3) is the maintenance of confidence in the financial system, although it is also relevant to the FSA's other regulatory objectives under the Act. However, many of its provisions relate to the conduct of bilateral dealings and it seeks to secure good market practice by firms undertaking inter-professional business in three ways:

(1) by increasing certainty by explaining how the Principles apply to inter-professional business, whilst acknowledging that what is required to meet the proper standards of conduct for a firm may differ depending on whether or not the firm is dealing with a market counterparty (see PRIN 1.2.1 G(Characteristics of the client));
(2) by setting out rules for inter-professional business in cases when it is not appropriate to rely on the Principles alone; and
(3) by setting out the FSA's understanding of certain market practices and conventions; drawing this information together in this way will assist certainty, reduce the scope for disputes and make it easier to resolve disputes that do arise.

01/12/2001

MAR 3.3

Contents and status of this chapter

01/12/2004

MAR 3.3.1

MAR 3 Annex 1 G provides guidance on the scope of this chapter.

01/12/2001

MAR 3.3.2

MAR 3 is not the only chapter of the Handbook that applies to firms doing inter-professional business. Firms should always consider what other parts of the Handbook may apply to them. A table listing the applicable Principles is set out in MAR 3 Annex 2 G. The table also sets out the key provisions of COB and CASS that may also apply to firms doing inter-professional business, but it should not be read as an exhaustive list. Firms should also consider the other provisions of the Handbook, especially but not exclusively IPRU and PRU .

01/03/2006

MAR 3.3.3

MAR 3 Annex 3 G is a statement of what the FSA understands to be generally regarded as good market practice and conventions in certain areas. It is not guidance on rules.

01/12/2001

MAR 3.4

Standards expected of firms when undertaking inter-professional business

01/12/2004

MAR 3.4.1

This section 3.4 provides guidance on the interpretation of the Principles and in particular Principle 1 (Integrity), Principle 2 (Skill, care and diligence), Principle 5 (Market conduct) and Principle 7 (Communications with clients.)

01/12/2001

MAR 3.4.2

The Principles, as they apply to inter-professional business, will be interpreted on the basis that market counterparties do not need or expect the level of protection provided to private customers or intermediate customers. In many respects, inter-professional dealings are mutually self-disciplining. Market counterparties have commercial sanctions available if they consider the conduct of someone they conduct business with is unacceptable, and are responsible for their own decisions. These factors are relevant also to the FSA's interpretation of the provisions of this chapter.

01/12/2001

SUITABILITY AND ADVICE

MAR 3.4.3

The Principles do not require a firm to assess the suitability of a particular transaction for its client once it has established that it is dealing with a market counterparty. For example, the firm is not obliged to ensure that the market counterparty understands the risks involved; nor is it under any duty to provide best execution or other dealing protections (but see MAR 3.4.5 G to MAR 3.4.9 G).

01/12/2001

MAR 3.4.4

Similarly, a firm is not obliged to give advice to a market counterparty. The mere passing of information does not mean the firm has assumed responsibility for giving advice. Although Principle 7 (Communications with clients) requires a firm to pay due regard to the information needs of its ''clients", the only requirement of Principle 7 relating to market counterparties is that a firm must communicate information to market counterparties in a way that is not misleading. (See PRIN 3.4.1 R.)

01/12/2001

COMMUNICATION OF INFORMATION

MAR 3.4.5

Principle 7 (Communications with clients) requires that a firm's communications with a marketcounterparty should not be misleading. Otherwise, for the reasons explained in MAR 3.4.4 G, Principle 7 does not apply to a firm's communications with market counterparties.

01/12/2001

MAR 3.4.6

If a firm volunteers information to a market counterparty, but no formal advisory arrangement is agreed, the firm need not advise a market counterparty about the reliability, relevance or importance of that information. Silence on the part of a firm does not result in a breach of Principle 7, unless, in the circumstances, it results in a communication made by a firm being misleading.

01/12/2001

MAR 3.4.7

(1) It is for a firm to decide whether it wishes to provide information to a market counterparty. If it does so the firm is not obliged to keep the market counterparty informed of any changes to the information, unless the firm has agreed to do so.

(2) Because the duties owed by a firm to a market counterparty are limited, it will frequently be the case that there will be no clash between the duties owed by the firm to the market counterparty and the firm's interests. There will in those cases be no requirement on the firm to disclose its interests.

(3) When a firm does owe a duty to a market counterparty that arises under the general law of contract (see as an example MAR 3.4.8 G) it should manage any conflict of interest. This can be achieved by the operation of internal Chinese Walls (in accordance with (Chinese Walls) COB 2.4). Otherwise, before it transacts, the firm should disclose the nature and extent of any material conflict to the market counterparty.

(4) This paragraph, MAR 3.4.7 G, is guidance on Principle 1 (Integrity) and Principle 5 (Market conduct).

01/12/2001

MAR 3.4.8

The following are examples of where there may be responsibilities that potentially give rise to a duty to disclose material conflicts of interest to the market counterparty:

(1) the firm is acting as agent for the market counterparty;

(2) the firm has agreed to advise the market counterparty;

(3) the firm otherwise owes fiduciary duties to the market counterparty.

01/12/2001

MAR 3.4.9

Thus, a firm acting as an arranger for a market counterparty, when the firm is an affiliated company of the other principal, should disclose that relationship to the market counterparty.

01/12/2001

CLARITY OF ROLE

MAR 3.4.10

A firm should take reasonable steps to ensure that it is clear to the market counterparty whether it is acting on its own account, as agent, or as arranger before it enters into a transaction. If a firm is acting as a wholesale market broker, it should indicate what type of broker it is, for example name-passing broker or matched principal broker. This paragraph, MAR 3.4.10 G, is guidance on Principle 7 (Communications with clients).

01/12/2001

MAR 3.4.10A

An ATS operator should take reasonable steps to ensure that the respective roles and responsibilities of the ATS operator and the market counterparty in relation to use of the ATS are clear to the market counterparty.

01/04/2004

MAR 3.4.11

If a firm has agreed with a market counterparty to act in one capacity in a transaction, it should not then act in any other capacity in that transaction without the consent of that market counterparty. For example, if a firm bids to transact on an agency basis, it should not, without consent, execute any part of the trade against its own book.

01/12/2001

MAR 3.4.12

It is not consistent with acting solely as an arranger (or name-passing broker) to take positions, even fleetingly, or act on a matched principal basis in the course of that transaction.

01/12/2001

MARKETING INCENTIVES, INDUCEMENTS AND PAYMENTS IN KIND

MAR 3.4.13

MAR 3.4.14 G and MAR 3.4.16 G provide guidance on the interpretation of the Principles and in particular Principle 1 (Integrity), Principle 3 (Management and control) and Principle 5 (Market conduct) as they apply to marketing incentives, inducements and payments in kind.

01/12/2001

MAR 3.4.14

A firm should take reasonable steps to ensure that it, or any person acting on its behalf, does not offer, give, solicit or accept an inducement if it is likely to conflict to a material extent with any duty which a recipient firm owes to another person. Inducement can include entertainment.

01/07/2006

MAR 3.4.15

If a firm gives an inducement and the recipient, although a market counterparty, is acting on behalf of customers, the firm may be subject to the provisions of COB 2.2 (Inducements).

01/07/2006

MAR 3.4.16

A firm should make and implement appropriate systems, controls and policies consistent with MAR 3.4.14 G.

01/12/2001

MAR 3.5

Transactions at Non-Market Prices

01/12/2004

INTRODUCTION

MAR 3.5.1

A firm should not enter into a transaction which it knows to be improper, or which it ought reasonably to have realised is improper, whether on its own account or for a third party. Firms often do not have the information to be able to assess the reasons why a market counterparty is entering into a transaction, but from past experience, a good indication that the purpose may be improper is if the transaction is undertaken at a price other than at the prevailing market price. Failure to use prevailing rates or prices may result in a firm participating, whether deliberately or unknowingly, in the concealment of a profit or loss, or in the perpetration of a fraud. There may, however, be legitimate reasons for entering into transactions at non-market prices, and MAR 3.5.4 R requires that a firm take reasonable steps to check this.

01/12/2001

MAR 3.5.2

Firms acting as arrangers (or name-passing brokers) have a more limited role in the transaction and MAR 3.5.4 R and MAR 3.5.7 E do not apply to them. Under Principle 1 (Integrity) and Principle 5 (Market conduct), a firm acting as arranger (or name-passing broker) should not conclude the arrangement if there is information from which it ought reasonably to conclude that the transaction is improper, whether or not it is at a non-market price.

01/03/2006

MAR 3.5.3

The requirements upon firms when conducting designated investment business with or for a customer are set out in COB 7.15 (Non-market-price transactions).

01/12/2001

NON-MARKET-PRICE TRANSACTIONS

MAR 3.5.4

Except where MAR 3.5.6 R applies, a firm must not enter into, as agent or principal, a non-market-price transaction under which it deals in an inter-professional investment unless it has taken reasonable steps to ascertain that the transaction is not being entered into by the market counterparty for an improper purpose (see also MAR 3.5.7 E).

01/12/2001

MAR 3.5.5

A firm must make and retain, for a period of three years, a record of the steps it has taken under MAR 3.5.4 R, in relation to each transaction.

01/12/2001

MAR 3.5.6

MAR 3.5.4 R does not apply to a non-market-price transaction if it is subject to the rules of an RIE.

01/12/2001

MAR 3.5.7

(1) To take reasonable steps as required by MAR 3.5.4 R a firm should:

(a) have in place procedures to enable it to identify non-market-price transactions (for guidance on this, see MAR 3.5.8 G to MAR 3.5.12 G);

(b) have in place, and approved by an individual holding a senior position with the firm, a policy and procedure for the review (to take place before the firm commits itself to that transaction) of the non-market-price transaction:

(i) by an individual holding a senior position with the firm; or

(ii) in accordance with (2);

and should follow that policy and procedure (for guidance on this, see MAR 3.5.17 G to MAR 3.5.21 G);

(c) ensure the review considers the reasons for the transaction (for guidance on this, see MAR 3.5.13 G to MAR 3.5.16 G); and

(d) check whether it has been put on notice that the transaction is for an improper purpose.

(2) A firm may have the review in (1)(b) carried out by an individual working for the firm who does not hold a senior position in the firm if:

(a) the policy and procedures established under (1) cover such reviews;

(b) that policy sets out the categories of transaction that may be reviewed in this way;

(d) the firm can demonstrate that these categories of transactions are routinely entered into by firms and are so defined that there is a high probability that transactions coming within them will be for proper purposes;

(e) the factors defining those categories do not in substance involve any judgment of whether any purpose is improper;

(f) the policy provides for matters to be referred to a senior level in appropriate circumstances;

(g) those approving the policy are satisfied that all those who are eligible under the policy to participate in the review have the appropriate level of skills;

(h) the policy has due regard to segregation of responsibilities; and

(i) the firm keeps under review whether the categories of transaction established under (2) do have the result described in (2)(d).

(3) Compliance with (1) and, to the degree relevant, (2) may be relied on as tending to show compliance with MAR 3.5.4 R.

(4) Contravention of (1) or, to the degree relevant, (2) may be relied on as tending to show contravention of MAR 3.5.4 R.

01/12/2001

WHETHER A TRANSACTION IS TO BE CONSIDERED A NON-MARKET-PRICE TRANSACTION

MAR 3.5.8

A non-market-price transaction is a transaction where:

(1) the dealing rate or price paid by the firm or its client differs from the prevailing market rate or price to a material extent; or

(2) the firm or its client otherwise gives materially more or less in value than it receives in return.

01/12/2001

MAR 3.5.9

Certain types of transactions or structured transactions are undertaken at non-market rates or prices, but are not necessarily considered to be non-market-price transactions. Examples are:

(1) a transaction with more than one component, where the individual components are entered into at non-market rates or prices, so long as the sum of the whole transaction produces an overall market rate or price, for example:

(a) asset swaps, where the underlying asset is sometimes sold at a non-market price; the fixed cash flows from the asset are then passed back to the seller, also at a non-market rate; where neither the asset trade nor the swap is at a market rate, the overall transaction can be considered to be at the market price where the combination of the two components delivers this result; and

(b) other types of swaps, where one or both legs is not on the forward curve (showing implied forward rates or prices), for example when up-front or final payments are involved;

(2) the purchase and sale of out of the money options. The fact that the strike price is away from the market price is not in itself sufficient to give rise to a non-market-price transaction; other factors, such as the level of premium, must also be considered;

(3) in tax-based transactions, a tax gain or liability should be taken into account in order to determine whether it is a non-market-price transaction.

01/12/2001

MAR 3.5.10

Certain circumstances may result in a transaction being undertaken at a price other than the market price, for example:

(1) the transaction is not for a marketable amount; or

(2) an order has been carried out over a period of time; or

(3) a transaction is executed outside normal market hours; or

(4) a transaction is executed in illiquid markets; or

(5) a transaction has a non-standard settlement period;

and these circumstances may be relevant in assessing whether the transaction constitutes a non-market-price transaction.

01/12/2001

MAR 3.5.11

The question of whether a transaction is a non-market-price transaction is to be judged as at the time it is effected and not with hindsight.

01/12/2001

MAR 3.5.12

The variation or rolling over of an existing transaction should be regarded as a new transaction for the purposes of MAR 3.5.4 R.

01/12/2001

WHETHER A TRANSACTION IS TO BE CONSIDERED TO BE FOR IMPROPER PURPOSES

MAR 3.5.13

Examples of improper purposes for transactions (see MAR 3.5.4 R) include:

(1) the perpetration of a fraud;
(2) the disguising or concealment of the nature of a transaction or of profits, losses or cashflows;
(3) transactions which amount to market abuse;
(4) vulnerable transactions under the Insolvency Act 1986; and
(5) "window dressing", in particular around the year end, to disguise the true financial position of the person concerned.

01/12/2001

MAR 3.5.14

A transaction may be for one or more of the purposes stated in MAR 3.5.13 G yet still not be a non-market-price transaction. MAR 3.5 should not be taken as qualifying in any way obligations on firms, however these arise, regarding these transactions.

01/12/2001

MAR 3.5.15

When a non-marketprice transaction has more than one component, the assessment of whether or not the transaction is improper should be made by reference to the transaction as a whole. Although the judgment is formed with reference to the whole transaction, a firm may conclude that the rationale for one component would cause it to be in breach of MAR 3.5.4 R.

01/12/2001

MAR 3.5.16

A transfer between a firm and its nominee or an intra-group transfer for risk management purposes may not be at a market price, but will often be for proper purposes. Where that is so, the firm may take part in it. However a firm should establish, and act in accordance with, a policy dealing with these transfers, and other intra-group non-market-price transactions, and be able to demonstrate that it has considered the consequences of participating in them.

01/12/2001

PROCEDURES TO BE TAKEN BY A FIRM

MAR 3.5.17

The procedures a firm has in place to identify non-market-price transactions should be appropriate for the types of transaction in question, bearing in mind MAR 3.5.8 G to MAR 3.5.12 G.

01/12/2001

MAR 3.5.18

When a firm proposes to enter into a non-market-price transaction, the personnel considering the transaction should:

(1) consider the justification and rationale of the other parties to the proposed transaction and whether the decision to enter into it was taken by the parties concerned at a senior level, and not by an individual trader or treasurer; and

(2) (if the transaction is approved) be satisfied that all the material terms of the non-market-price transaction (so far as they affect the firm) have been agreed before the transaction is entered into and that they are promptly recorded in accordance with MAR 3.5.7E; material terms are likely to include the amounts each counterparty is to pay and receive and whether any amounts are to be netted against or offset against any amounts due and owing under a separate transaction.

01/12/2001

MAR 3.5.19

The degree of seniority referred to in MAR 3.5.7 E (1)(b) may depend on the nature of the transaction.

01/12/2001

MAR 3.5.20

A firm operating an electronic matching system should consider implementing appropriate systems to identify potential non-market-price transactions. In these circumstances, it may be appropriate for such identification, and appropriate resulting action, to occur after the transaction has taken place.

01/12/2001

MAR 3.5.21

A firm may take reasonable steps to ascertain its market counterparty's rationale for entering into the transaction, as set out in MAR 3.5.18 G, but still be unable to find this out. It is up to the firm, having regard to the circumstances, to decide whether it is appropriate to enter into the transaction. One relevant circumstance is whether or not the market counterparty is another firm, in which case the firm is entitled to assume that the other firm is acting properly, in the absence of any further information to the contrary.

01/12/2001

MAR 3.6

Taping

01/12/2004

MAR 3.6.1

(1) This section MAR 3.6 provides guidance on the interpretation of the Principles, and in particular Principle 3 (Management and control), as they apply to the capture of certain transactional information and other matters. MAR 3.6 applies only to inter-professional business and there are other requirements in the Handbook which relate to record-keeping requirements.

(2) MAR 3.6 also provides additional guidance on the record-keeping requirements of SYSC 3.2.20 R(Records).

01/12/2001

MAR 3.6.2

MAR 3.6 does not apply:

(1) to a firm acting in the course of carrying on the regulated activity of establishing, operating or windingupa collective investment scheme; or

(2) to an insurer; or

(3) in respect of a transaction if the firm is subject to record-keeping requirements in COB for that transaction.

01/12/2001

MAR 3.6.3

A firm should implement appropriate systems and controls with a view to ensuring that the material terms of all transactions to which it is a party, and other material information about such transactions, are promptly and accurately recorded in its books or records. The manner in which this information may be recorded include:

(1) voice recordings of transactions;

(2) voice recordings of oral confirmations;

(3) written trading logs or blotters; and

(4) automated electronic records.

01/12/2001

MAR 3.6.4

A firm acting as an arranger (or name-passing broker) need record only those terms that are necessary for the transaction to be identified in its records or that are otherwise relevant to its role as arranger (or name passing broker). For example, it would not normally know the payment and settlement instructions.

01/12/2001

MAR 3.6.5

A firm should be able to access all records as promptly as necessary. Records should be kept in comprehensible form or should be capable of being promptly so reproduced. The firm should make and implement appropriate procedures to avoid unauthorised alteration of its records.

01/12/2001

MAR 3.6.6

If the records identified in MAR 3.6.3 G are substituted by written or electronic confirmations produced in accordance with SYSC 3.2.20 R (Records), then that confirmation may be an adequate record of the transaction.

01/12/2001

MAR 3.6.7

If a transaction is agreed or arranged through an electronic trading, matching and order-routing system, then the records provided by that system may be an adequate record of the transaction.

01/12/2001

MAR 3.6.8

A firm should keep under review whether, and to what extent, to make and retain voice recordings of its front and back office telephone lines used for negotiating, agreeing, arranging and confirming transactions and for the passing of payment instructions. (See also MAR 3.6.10 G.)

01/12/2001

MAR 3.6.9

If a firm undertakes oral confirmations of the transactions it executes or brings about, voice recordings of these conversations can constitute an adequate record of that confirmation.

01/12/2001

MAR 3.6.10

In undertaking a review under MAR 3.6.8 G, it is likely to be a relevant factor that voice recordings:

(1) provide an immediate record of all transactions and therefore may assist firms in resolving any disputes;

(2) may assist a firm to identify whether any personnel of the firm or of its market counterparty are involved in inappropriate behaviour; market counterparties may take comfort in knowing that their transactions are immediately recorded and that this provides evidence that can be relied upon; and

(3) can provide evidence of the rationale for a particular trading strategy or other aspects of inter-professional business and thereby provide protection to the firm.

01/12/2001

MAR 3.6.11

A firm should make and implement policies on the length of time it keeps tapes. The FSA does not expect tapes to be kept for the full period required by the general record-keeping requirement, except where a firm relies upon voice recordings to comply with record-keeping requirements, in which case it should retain those recordings in accordance with the relevant requirements. One factor in setting that policy may be the use of tapes to assist the firm in resolving any disputes with market counterparties.

01/12/2001

MAR 3.7

Firms acting as Wholesale market brokers and those undertaking transactions through them; provisions concerning brokers and arrangers generally

01/12/2004

MAR 3.7.1

MAR 3.7 provides guidance on the interpretation of the Principles, and in particular Principle 5 (Market conduct), as they apply to certain responsibilities of firms acting as wholesale market brokers and of persons undertaking transactions through them. In particular, it covers the passing of names and differences.

01/12/2001

MAR 3.7.2

The use of various terms for brokers and arrangers are based on the understanding that name-passing brokers are, in simple terms, what arrangers are called in certain wholesale markets. As such, the terms are virtually interchangeable and in MAR both terms have generally been used for the avoidance of doubt. Similarly, name-passing brokers and "matched principal brokers" are both subsets of wholesale market brokers. The use of the latter term is intended to reduce confusion.

01/12/2001

PASSING OF NAMES

MAR 3.7.3

A firm acting as a name-passing broker should not prematurely divulge the names of the prospective counterparties to each other, for example before both sides display a serious intention to transact. However, as soon as the material terms of a transaction have been agreed, a firm acting as a name-passing broker should aim to achieve a mutual and immediate exchange of names. When a market counterparty name is unacceptable to another, it is quite proper for a firm acting as a name-passing broker not to divulge by whom the name was refused.

01/12/2001

SETTLEMENT OF DIFFERENCES

MAR 3.7.4

MAR 3.7.5 R to MAR 3.7.8 G apply:

(1) to a firm when it acts as a name-passing broker; and

(2) to a firm whether acting as principal or agent, when its transaction is brought about by a firm acting as a name-passing broker.

01/12/2001

MAR 3.7.5

(1) If a firm acting as a name-passing broker compensates a market counterparty for a difference, that difference must be settled in money (which for these purposes includes payment by discounting, reducing or rebating commission).

(2) A "difference" means (in MAR 3.7.5 R to MAR 3.7.8 G) any difference between a rate or price quoted by a firm acting as a name-passing broker and the rate or price at which the transaction is ultimately concluded.

01/12/2001

MAR 3.7.6

When arranging a transaction, a name-passing broker is trying to achieve a mutual and immediate exchange of names, based on firm quotation of prices. Inevitably, for non-electronic arrangers, there will be occasions when the transaction is not completed at the original price (for instance because a firm price has been hit by another counterparty). The name-passing broker is said to have missed the original price when a market counterparty accepts a firm quote at that price, but the name-passing broker is unable to arrange for the deal to be completed at that price.

01/12/2001

MAR 3.7.7

A firm acting as a name-passing broker should not ordinarily accept liability for differences and should provide its services on the basis that it does not do so. (This is because accepting liability for differences amounts to taking a position legally and economically, and the name-passing broker would not be following MAR 3.4.12 G.) A firm doing business with a name-passing broker should not, in the ordinary course, ask the latter for compensation for differences. However, once a difference has arisen, a firm acting as a name-passing broker may offer to compensate its market counterparty for some or all of the difference to preserve the relationship with the market counterparty concerned or for other legitimate commercial reasons. That compensation should be in accordance with MAR 3.7.5 R.

01/12/2001

MAR 3.7.8

When a price has been missed, a firm acting as principal or agent should generally complete the transaction at the next available price through the name-passing broker that has missed the original price. To do otherwise can be prejudicial to the smooth operation of the markets. If the firm does not proceed with the transaction, it should first consider whether withdrawing would be likely to affect the market concerned, and should immediately communicate its decision to the name-passing broker. The firm should not decline to enter into the transaction at the new price if it would breach a reasonable expectation on the part of the name-passing broker that it would not do this.

01/12/2001

GENERAL PROVISIONS ON WHOLESALE MARKETBROKERS AND ARRANGERS

MAR 3.7.9

Any payment for broking or arranging services rendered by a firm, other than on a matched principal basis, should be in money (which for these purposes includes payment by discounting, reducing or rebating commission) unless otherwise agreed in writing between the parties.

01/12/2001

MAR 3.7.10

A firm acting as a wholesale market broker or arranger should not unfairly favour one market counterparty client over another. Treatment that would otherwise have been unfair is not unfair if the market counterparty concerned has expressly consented to it. The "client" of a wholesale market broker or arranger means (in MAR 3.7.10 G and MAR 3.7.11 G) a person for whom it is providing its services as wholesale market broker or arranger.

01/12/2001

MAR 3.7.11

A firm should not place an order with a firm acting as a wholesale market broker or arranger if the main purpose is to ascertain either the identity of any client of that firm, or information about transactions into which that client may be interested in entering. For example, a firm that wishes to purchase 1000 bonds should not have a firm arrange for the purchase of 100, in order to discover the identity of a person willing to sell those bonds, and then transact with that other person direct for the other 900.

01/12/2001

MAR 3.8

Codes of Practice

01/12/2004

MAR 3.8.1

The FSA does not endorse individual codes of practice applying to inter-professional business (except for the Takeover Code) that are in place in some markets. It will, however, take into account the differing standards and practices operating in markets when interpreting the Principles as they apply to inter-professional business. Further, non-compliance with those codes, or of the Non-Investment Products Code in respect of certain non-authorisable activities, may raise issues such as the integrity or competence of a firm which are relevant to the threshold conditions (see COND 2.5.6 G (4)).

01/12/2001

MAR 3 Annex 1

Guidance relevant to MAR 3

01/12/2004

This chapter, MAR 3, applies to firms in their dealings with market counterparties, as set out in MAR 3.1.2 R. When market counterparties have opted to be treated as intermediate customers under COB 4.1.7 R (Classification of another firm or an overseas financial services institution), this chapter does not apply. The requirements on firms in such circumstances are those set out in COB. MAR 3 does, however, apply to firms in their dealings with intermediate customers who have opted to be treated as market counterparties under COB 4.1.12 R (Large intermediate customer described as a market counterparty).

This chapter sets out the requirements upon firms in their dealings with market counterparties. The way a firm is assessed under COB 4.1 (Client classification) has no bearing on its obligations to assess its own clients.

The list of activities in MAR 3.1.2 R (Application: What?) is not based on types of permission. It is based on the activities of dealing, arranging and advice on investments. This means, for example, that a firm may be subject to MAR 3 if it purchases securities in the course of:

(1) operating a collective investment scheme; or

(2) acting as a life insurance company; or

(3) acting as agent for a customer;

in making that purchase This is notwithstanding that the operation of a collective investment scheme, acting as a life insurance company and acting as agent for a customer for a private customer are not activities that are covered by this chapter in their own right.

MAR 3 does not affect the application provisions of the Principles (see PRIN 3 (Rules about application)). The purpose of the application provisions of MAR 3, as they apply to the guidance on the Principles, is to explain in what situations MAR 3 may be used as guidance for interpreting the Principles. If MAR 3 is silent about how the Principles apply to a particular situation, the Principles still apply.

Principles. It is not, in general, specifically tailored for particular types of business, nor is it a comprehensive statement of how the Principles apply to inter-professional business in all situations. The guidance on the Principles in MAR 3 should be read in the light of other requirements that may be applicable in a particular case. For example, this guidance applies to on-exchange business, and does not take into account specific rules of exchanges.

The application provisions in MAR 3.1.2 R (Application: What?) mean that corporate finance business will normally be outside the scope of this chapter. However, firms should note that some activities, such as dealing, carried out in connection with corporate finance business, may be subject to this chapter.

This chapter does not apply to the approval by firms of a financial promotion (see MAR 3.1.3 R); rules and guidance relating to financial promotions are in COB 3. Most financial promotions by unauthorised persons to a market counterparty are exempt under the Financial Promotion Order, (for example, article 19 (investment professionals)) so approval should not be required. In addition, the application of COB 3 to approval of a financial promotion for communication to a market counterparty is limited (see COB 3.2.4 R (2) and COB 3.2.5 R(1) (Exemptions)).

The same transaction may give rise to obligations under this chapter and another sourcebook, such as COB. For example, if a firm purchases an inter-professional investment from a market counterparty on behalf of a customer, this chapter applies to the relationship between the firm and the market counterparty. COB governs the relationship between the firm and the customer.

In some cases, a deal carried out abroad by the firm's overseas branch or by another member of the firm's group may be subject to this chapter if the final booking is to the firm's balance sheet in the United Kingdom. In all cases, the question is whether the activity involves a firm carrying on inter-professional business from an establishment maintained by the firm in the United Kingdom. For the purposes of this discussion, booking does not include doing a deal with a counterparty and transferring it to the United Kingdom balance sheet by an intra-group back-to-back transaction. It is about putting the transaction with the market counterparty directly onto the UK balance sheet.

(1) In some cases, the transaction involves the firm and an overseas affiliate. The overseas affiliate negotiates and arranges the deal with the market counterparty abroad. However, the actual contract is between the firm in the United Kingdom and the market counterparty. It is likely that this chapter will apply to the firm. This is because the firm's entry into the contract amounts to dealing and that dealing is done from an establishment maintained by the firm in the United Kingdom.

(2) If the booking is merely an internal accounting exercise, and the transaction has no other United Kingdom connection, it is likely that this chapter will not apply. For example, the transaction may be negotiated and executed by an overseas branch of the firm but booked to the firm's United Kingdom balance sheet. If the booking to the United Kingdom balance sheet is the only involvement of the firm in the United Kingdom, it is likely that this chapter will not apply to the firm. This is because, even though the firm is party to the contract and is carrying out a dealing transaction, all the dealing activity takes place at the foreign branch. A mere bookkeeping entry in the United Kingdom, not involving the counterparty in any way, does not mean that the dealing activity is carried on from an establishment maintained by the firm in the United Kingdom. It is carried on from the overseas branch.

The territorial application of this chapter does not modify those of any other part of the Handbook. In particular, firms should note the application of Principle 5 (Market conduct), which applies to activities which have, or might reasonably be regarded as likely to have, a negative effect on confidence in the financial system, wherever they are carried on (see PRIN 3.3.1 R).

Nothing in this chapter:

(1) modifies any duty owed by a firm to a private customer or intermediate customer under the provisions of any other part of the Handbook; or

(2) relieves a firm of any other obligation to which it may be subject under the general law; or

(3) should be read as qualifying or modifying the Code of Market Conduct, the Code of Practice for Approved Person or the Statement of Principle.

01/12/2001

MAR 3 Annex 2

Principles and key COB provisions

01/12/2004

Rule

Description

Principle 1

A firm must conduct its business with integrity.

Principle 2

A firm must conduct its business with due skill, care and diligence.

Principle 3

A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.

Principle 4

A firm must maintain adequate financial resources.

Principle 5

A firm must observe proper standards of market conduct.

Principle 7

A firm must ... communicate information [to its clients] in a way which is ... not misleading.

Principle 10

A firm must arrange adequate protection for clients' assets when it is responsible for them.

Principle 11

A firm must deal with its regulators in an open and cooperative way, and must disclose to the FSA appropriately anything relating to the firm of which the FSA would reasonably expect notice.

COB 3

Financial promotion (relating to the approval of a financial promotion, see paragraph 7 in MAR 3 Annex 1 G)

COB 2.4

Chinese Walls

COB 4.1

Client classification

COB 7.13

Personal Account Dealing

CASS

Client assets

01/12/2001

MAR 3 Annex 3

Good market practice and conventions

01/12/2004

INTRODUCTION

This annex, MAR 3 Annex 3, is a statement of what the FSA understands to be generally regarded as good market practice and conventions in certain areas. It is not guidance on rules and is issued under section 157(1)(d) of the Act . This annex applies to all kinds of inter-professional business. It will be evident that much of the content is equally applicable to market counterparties as well as firms.

CONFIDENTIALITY

When information is received from a market counterparty under conditions of confidentiality, that confidentiality is likely to be enforceable by the owner of that information. Confidentiality should be respected, subject to regulatory and legal requirements.

Firms are reminded that the use of loudspeakers in broking and dealing rooms in close proximity to other lines of communication could result in breaches of confidentiality.

NEGOTIATION OF TRANSACTIONS

It is good practice for a firm to agree expressly all the economic terms of a transaction before it commits itself to the transaction. A firm should negotiate the remaining terms in good faith and try to agree them as soon as possible.

It is good practice for a firm to regard itself as bound to transact once the rate or price and any other key commercial terms have been agreed (whether orally or in written form), unless the parties explicitly and unambiguously agree to the contrary.

Generally, a firm that regularly uses the services of a firm acting as a name-passing broker should indicate to it the market counterparties with which, and the investments in which, it is not prepared to transact. That indication should not be in a form which would damage or lower the standing or reputation of the market counterparty in the estimation of reasonable market counterparties if they knew of it. A firm which is given an indication should treat it as confidential.

FIRMNESS OF QUOTATION

It is good practice for a firm to follow market conventions regarding quotation, unless it has specifically agreed otherwise with its market counterparty in advance. It should be clear to a market counterparty ;

(1) whether the quote is firm or not;

(2) whether the quote is subject to any conditions, and, if it is, what they are;

(3) for how long the quote remains firm (in fast moving markets, when practicable); and

(4) whether the quote is firm only for the normal marketable amount (if appropriate, otherwise the firm should state the size of the quote).

Express clarification of these matters is not necessary to the extent that the firm quotes in accordance with the relevant market convention or exchange rules (if applicable).

When a firm quotes to a market counterparty a firm rate or price (whether through an arranger, or name-passing broker , or directly), it is not good practice for the firm then to withdraw that quote or, if that quote is accepted during the period for which the quote remains firm, to decline to deal at that rate or price. A firm may decline to deal with a market counterparty in these circumstances if it was unaware of its identity when the firm gave the quote and the name turns out to be unacceptable, for example, on the grounds of credit risk.

LIMIT ORDERS

Before a firm accepts any limit order from a market counterparty, it is good practice to have made and implemented appropriate:

(1) policies on these orders and in particular the circumstances in which and the terms on which it will accept these orders; and

(2) systems and controls for carrying them out.

A limit order means a stop loss order and any other instruction from a market counterparty to execute transactions if rates or prices reach specified levels. These orders may be time limited or may be for an indefinite period.

OUT OF HOURS/OFFICE DEALING

It is good practice for firms to issue guidelines to their staff on transactions entered into after normal hours or from outside premises, either by mobile phone or any other equipment. The guidelines should cover:

(1) the type of transactions which may be undertaken in this way;

(2) where and with whom these transactions may be executed;

(3) permitted limits;

(4) how and when these transactions should be booked into and recorded on the front and back office systems; and

(5) how and when these transactions are to be confirmed.

When answering machines are used for instant reporting and recording of all off-premises transactions, they should be installed and located in such a way that reported transactions cannot subsequently be erased without senior management approval.

The use of mobile phones for business purposes from within the dealing room, except in an emergency, is considered bad practice.

SETTLEMENT ERRORS

If a firm becomes aware of a settlement error that benefits it at the cost of a market counterparty , it is good practice to inform the market counterparty promptly and reverse the error.

If a firm , acting as a broker , becomes aware that it is holding assets on behalf of a market counterparty because of a settlement error which adversely affects that market counterparty , it is good practice to inform the market counterparty promptly and try to rectify the situation.

CONFIRMATIONS

Confirmations provide a useful safeguard against dealing errors and can be a valuable element in the control of the firms inter-professional business and exposures. It is good practice for a firm to make available to, or provide to, the market counterparty written confirmation of the material terms of a transaction between them, as soon as possible after the transaction has been agreed or executed.

It is acceptable market practice for the firm to agree with its market counterparty that only one party need send a confirmation. If a firm undertakes this practice to a material extent, it is advisable to identify the legal and other risks involved and address them in the firm's risk control policies.

If there is a standard form of confirmation that applies to a transaction a firm enters into, it is good practice to ensure that that form is used, unless there is good reason not to. One example of when there is an applicable standard form confirmation is when the parties enter into the transaction under the terms of a master agreement that provides for an applicable form of confirmation. Another is when it is customary in the market concerned to use a particular form of confirmation for transactions of that kind.

In general, it is not good practice for confirmations to be issued by or sent to the individual dealer responsible for the transaction. It is good practice to ensure that the dealer concerned is not responsible for checking confirmations unless there are exceptional circumstances. If the dealer is given that responsibility, it is good practice to subject the process to independent monitoring.

In general, it is good practice for a firm which arranges a transaction to try to ensure that the parties agree who is to issue a confirmation.

Some transactions are matched through an electronic matching system that does not provide for the issue of confirmations, but instead makes and retains records of transactions itself. In these cases, it may be appropriate for a firm neither to receive nor issue confirmations, provided the system allows for the back offices of users to verify the details of transactions entered into on the system.

The statements of good practice in paragraphs 17 to 22 do not apply to on-exchange business.

STANDARD SETTLEMENT INSTRUCTIONS

It is good practice for a firm to make and implement appropriate policies on the use of standard settlement instructions (SSIs) to reduce the incidence and size of differences arising from a mistaken settlement of funds. These are especially appropriate when the firm has a relationship with a market counterparty which suggests there will be regular payment of significant amounts.

It is good practice to establish SSIs in a secure and verifiable format. A firm acting as an arranger (or name-passing broker) has no responsibility for ensuring that its market counterparty have SSIs in place.

MASTER AGREEMENTS

Firms are encouraged to negotiate and execute master agreements. These govern the relationship between the parties and how such a relationship and all transactions under it shall be terminated in the event of one party's default upon a transaction. It is recognised that executed documentation can be and should be used as an efficient risk management tool. Firms should consider the benefits of valid close out netting provisions (see IPRU).

If it is the policy of a firm to use master agreements, it is good practice to make and implement policies for what transactions should be subject to the terms of which master agreement and have systems and controls for ensuring compliance with that policy. If a firm has a policy that transactions should be entered into with a market counterparty only after a master agreement has been implemented, it is advisable to have procedures to ensure that any exceptions are agreed at an appropriate level.

COMMISSION/BROKERAGE

It is good practice for firms acting as principals to pay due brokerage bills promptly. Overdue payments can seriously disadvantage wholesale market brokers, since overdue payments result, in their treatment by the FSA for regulatory purposes, as an increase in their cost of capital.

DISPUTES

In the event of a dispute between a firm and a market counterparty, it is preferable for the parties to seek to resolve the issues themselves. If they cannot reach agreement, they should consider the advantages of using established arbitration or mediation services.

01/06/2003

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 4.1.3

The Takeover Code and the SARs provide valuable regulation in the areas of takeovers, mergers and substantial acquisition of shares of companies. The purpose of endorsing the Takeover Code and the SARs is to provide them with statutory support. The other requirements in this chapter provide further support for the functions of the Takeover Panel.

20/09/2001

MAR 4.1.4

Endorsing the Takeover Code and the SARs and imposing the other requirements in this chapter furthers the FSA's regulatory objectives, and in particular the objectives of market confidence and protection of consumers.

20/09/2001

MAR 4.2

ENDORSEMENT

01/12/2004

MAR 4.2.1

The FSA endorses:

(1) the Takeover Code; and

(2) the SARs;

as respects the firms described in MAR 4.1.1 R.

20/09/2001

MAR 4.2.2

The FSA's endorsement in MAR 4.2.1R has effect in relation to the Takeover Code and the SARs as amended from time to time. This is because the FSA has notified the Takeover Panel that it is satisfied with the Takeover Panel's consultation procedures, and not withdrawn that notification, in accordance with section 143(6) of the Act (Endorsement of codes etc.).

20/09/2001

MAR 4.2.3

The effect of the FSA's endorsement in MAR 4.2.1R is that, under section 143 of the Act (Endorsement of codes etc.):

(1) at the request of the Takeover Panel, the FSA may take enforcement action against a firm which contravenes the Takeover Code or the SARs, under Part IV (Permission to Carry on Regulated Activities), Part XIII (Incoming firms: Intervention by Authority), Part XIV (Disciplinary Measures) and Part XXV (Injunctions and Restitution) of the Act (see ENF 14.10); and

(2) at the request of the Takeover Panel, the FSA may take enforcement action against an approved person under section 66(2)(b) of the Act (Disciplinary powers).

20/09/2001

MAR 4.2.4

A failure to comply with a requirement imposed, or ruling given, by the Takeover Panel under the Takeover Code or the SARs has the same effect as a contravention of the Takeover Code or the SARs, under section 143(5) of the Act (Endorsement of codes etc.).

20/09/2001

MAR 4.2.5

ENF 14.10 contains guidance on the FSA's exercise of its enforcement powers in this area.

20/09/2001

MAR 4.3

FURTHER SUPPORT OF THE TAKEOVER PANEL'S FUNCTIONS

01/12/2004

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 or the SARs apply (including a rule 8 transaction ) 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 or the SARs.

20/09/2001

MAR 4.3.2

(1) The Takeover Panel publishes notices regarding compliance with the Takeover Code and SARs. 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 or the SARs. 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.

20/09/2001

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 Codeor the SARsapplies.

(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 Codeor the SARsapplies.

20/09/2001

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 Codeor SARsso as to require the authorised professional firm to provide services in breach of, or enable breach of, the Takeover Code or SARs.

20/09/2001

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

Alternative Trading Systems

MAR 5.1

Application and purpose

01/12/2004

MAR 5.1.1

This chapter is relevant to every firm that has, or intends to apply for, a Part IV permission and that:

(1) if it is a UK domestic firm, operates or proposes to operate an ATS from an establishment in the United Kingdom or elsewhere;

(2) if it is an overseas firm, operates or proposes to operate an ATS from an establishment in the United Kingdom.

01/12/2004

MAR 5.1.2

This chapter is subject to the provisions in ECO. For example, this chapter is not relevant to an incoming ECA provider acting as such.

01/12/2004

Purpose

MAR 5.1.3

The purpose of this chapter is to provide a framework for implementing several of the CESR ATS standards. The FSA considers that the implementation of these standards will protect consumers, promote market confidence, reduce financial crime and promote public understanding of the financial system. These standards, and therefore this chapter, do not apply to bilateral systems, which are excluded from the definition of an ATS.

01/12/2004

MAR 5.2

Guidance about what constitutes an ATS

01/12/2004

MAR 5.2.1

MAR 5.2.2 G to MAR 5.2.8 G set out guidance on the meaning of the expressions ATS and bilateral system (as defined in the Glossary). This guidance is adapted from the guidance contained in the CESR ATS standards on the meaning of "qualifying system" (which is the term equivalent to ATS used in those standards).

01/12/2004

"System"

MAR 5.2.2

For the purposes of the definitions of an ATS and a bilateral system, a system is intended to include not only the electronic parts (if any) of a system but also any rules, protocols, procedures and agreements that make up the system. It is also intended to cover the various parts of a system whether provided directly by the ATS operator or by another person under an arrangement with the ATS operator.

01/12/2004

"Price taking systems"

MAR 5.2.3

A system may be an ATS although it does not directly involve price formation. For example, a price taking system such as certain crossing systems may be an ATS.

01/12/2004

"Buying and selling interests"

MAR 5.2.4

The expression buying and selling interests is intended to include not only orders, but also quotes and indications of interest.

01/12/2004

"Brings together"

MAR 5.2.5

Buying and selling interests will be regarded as being brought together in the system if they are brought together under the system's rules or by means of the system's protocols or internal operating procedures. The concept of bringing together is intended to cover any process under which interests interact; this may be by automatic matching, by way of selection of interests by users themselves or otherwise. It is not necessary that the interests be displayed to users. The fact that, after interests are matched, the users must ratify a proposed transaction does not mean that the interests are not brought together in the system. However, systems such as order routing systems where interests are transmitted but do not interact are not intended to be covered by the definition of an ATS.

01/12/2004

"Non-discretionary rules"

MAR 5.2.6

The reference to non-discretionary rules in the definition of an ATS is intended to exclude systems where the operator exercises discretion as to how the interests interact. However, the reference is not intended to exclude a system just because the operator has discretion as to whether or not to enter an interest into the system. It is also not intended to exclude a system just because users have discretion about whether or not to take up or accept any expression of interest.

01/12/2004

Bulletin boards etc.

MAR 5.2.7

A bulletin board or similar system where users contact each other outside the system (that is, not under the system's rules and not by means of the system's protocols or internal operating procedures) to negotiate the material terms of transactions will not be covered by the definition of an ATS.

01/12/2004

Bilateral system/central counterparty

MAR 5.2.8

The definition of an ATS excludes bilateral systems. The definition of bilateral system is intended to capture a system that is like an ATS except that a single person enters into one side of every transaction effected using the system. It is not however intended to cover central counterparty systems, where in substance participants deal among themselves but where their deals are assumed by the central counterparty as buyer and seller. A central counterparty will have a flat book unless there is a default or mistake, while typically the counterparty in a bilateral system will take principal positions in investments on a continuous basis. The definition of bilateral system is slightly flexible in that occasional crossings of client orders will not of itself make the system an ATS. It also includes a system where, rather than a single person, one of a number of persons in the same group enters into one side of every transaction effected using the system.

01/12/2004

MAR 5.3

Notification of establishment of an ATS

01/12/2004

Application for permission

MAR 5.3.1

A person who applies for a Part IV permission and proposes to operate an ATS will be required to complete appropriate parts of the application pack relating to the operation of an ATS(see AUTH 3.9 (Procedures in relation to applications for Part IV permission)).

01/12/2004

Variation of permission to operate an ATS

MAR 5.3.2

If a firm that proposes to operate an ATS applies for variation of Part IV permission to carry on an additional regulated activity necessary to operate the ATS, the FSA considers that, for the purposes of SUP 6.3.20 G (Applications involving significant changes), the proposal will usually cause a significant change to the firm's business or risk profile. The FSA may therefore require the firm to complete the appropriate parts of the full application pack (see AUTH 3.9), as directed by the FSA.

01/12/2004

Notice by firm that already has permission to operate an ATS

MAR 5.3.3

If a firm that proposes to operate an ATS already has permission to carry on the regulated activity necessary to operate the ATS, the firm should give notice of the proposal to the FSA before it begins to operate the ATS, in accordance with Principle 11 (Relations with regulators). This is because the FSA considers that this is a business expansion that could have a significant impact on the firm's risk profile or resources (see SUP 15.3.8 G). When the FSA receives notice, it may request further information from the firm such as the completion of a systems form.

01/12/2004

Notification of significant changes to ATS

MAR 5.3.4

The FSA would also expect an ATS operator to give the FSA notice if there is any significant change to the operation of an ATS that it operates, in accordance with Principle 11 (Relations with regulators). Notice should be given as soon as reasonably practicable after the change.

01/12/2004

MAR 5.4

Requirements to be imposed on the Part IV permission of an ATS operator

01/12/2004

MAR 5.4.1

The FSA proposes to implement several of the CESR ATS standards by imposing requirements on the Part IV permissions of ATS operators.

01/12/2004

MAR 5.4.2

The FSA proposes to impose the requirements on the Part IV permissions of ATS operators in a way that has regard to the principle in the CESR ATS standards that the standards should be implemented in a differentiated way, taking into account the particular risk to be addressed and each ATS's circumstances.

01/12/2004

MAR 5.4.3

If a person who proposes to operate an ATS applies for a Part IV permission, the FSA will be minded to impose the requirements under section 43 of the Act (Imposition of requirements).

01/12/2004

MAR 5.4.4

If a firm that proposes to operate an ATS applies for a variation of Part IV permission to carry on an additional regulated activity necessary to operate the ATS, the FSA will be minded to impose the requirements under section 44 (Variation etc. at request of authorised person) or section 45 (Variation etc. on the Authority's own initiative) of the Act.

01/12/2004

MAR 5.4.5

In relation to current ATS operators, or firms proposing to operate an ATS that have permission to carry on the regulated activity necessary to operate the ATS, the FSA will be minded to impose the requirements under section 44 or 45 of the Act.

01/12/2004

MAR 5.4.6

The FSA may decide not to impose particular requirements in particular cases if it is not appropriate to do so. For example, the FSA will be minded not to impose requirements for pre-trade information to be provided to users or published on ATS operators that operate price taking systems or request for quote systems. Also, it will be minded not to impose requirements for publication of post-trade information on ATS operators that operate ATS's that facilitate trading in interest-rate swaps, contractually based investments relating to currency, or debt securities other than benchmark bonds.

01/12/2004

MAR 5.4.7

The FSA proposes to impose requirements for publication of pre-trade and post-trade information that are no more onerous in relation to an investment than the standard that applies under the Act or relevant national law of another State (as the case may be) to the exchange operating the underlying market for the investment.

01/12/2004

MAR 5.4.8

MAR 5 Annex 1 G sets out an illustration of the form of requirements that the FSA will be minded to impose on the Part IV permission of an ATS operator. The exact form may vary to take into account the matters referred to in MAR 5.4.2 G. The FSA may also consider setting out more detail in the requirements if the FSA considers it appropriate to do so (for example, if requested to do so by an ATS operator).

01/12/2004

MAR 5.5

Parts of the Handbook applicable to the operation of an ATS

01/12/2004

MAR 5.5.1

The purpose of this section is to help prospective and actual ATS operators find their way around the Handbook by setting out which parts of it apply to them when operating an ATS.

01/12/2004

MAR 5.5.2

The application of the Handbook to the operation of ATS's is summarised in MAR 5.5.3 G. ATS operators should read applicable parts of the Handbook to find out what the detailed regulatory requirements are for operating ATS's.

01/12/2004

MAR 5.5.3

Handbook provisions applicable to ATSs

Part of Handbook

Applicability to ATSs

High Level Standards

Principles for Businesses (PRIN)

This applies. However, note that some Principles are (partially) disapplied for clients that are market counterparties as further detailed in PRIN 3.4.

Senior management arrangements, Systems and Controls (SYSC)

This applies.

Threshold Conditions (COND)

This applies.

Statements of Principle and Code of Practice for Approved Persons (APER)

This applies to an approved person who performs a controlled function for an ATS operator.

The Fit and Proper test for Approved Persons (FIT)

This applies.

General provisions (GEN)

This applies.

Business standards

Interim Prudential sourcebooks (IPRU)

These apply, as appropriate.

Conduct of Business sourcebook (COB)

In general, COB applies to ATS operators.
Service companies that operate an ATS are subject to the provisions of COB mentioned in COB 1.2.1 (2)A.
There are special terms of business set out in COB 4.2.17 for ATS operators that have customers (as opposed to those whose only clients are market counterparties).
Most of COB will not apply to ATS operators if their business is wholly within the scope of Inter-Professional Conduct (Inter-professional conduct): see COB 1.3.4.

Market Conduct sourcebook (MAR)

The Code of Market Conduct (The Code of Market Conduct) applies. Price Stabilising Rules (Price Stabilising Rules)and Endorsement of the Takeover Code (Endorsement of the Takeover Code) are likely to be of limited relevance to the business of an ATS operator.
Inter-Professional Conduct (Inter-Professional Conduct will ordinarily be relevant to ATS's whose clients are market counterparties. MAR 3.4.10A G is particularly relevant to the information that these ATS operators should provide to their clients.
Ordinarily, service companies are not covered by Inter-Professional Conduct. However, MAR 3.1.1 R provides that MAR 3.4.10 G and MAR 3.4.10A G apply to a service company that operates an ATS.
MAR 5 (Alternative trading systems) is directly relevant to the operation of an ATS.

Training and Competence sourcebook (TC)

This applies.

Regulatory process

Authorisation manual (AUTH)

This applies in relation to an application by a prospective ATS operator for authorisation. In particular, 3.24.1 provides that if an applicant who wishes to operate an ATS intends to assume responsibility for the clearing or settlement of transactions effected using the ATS, the applicant should provide sufficient information with its application to demonstrate that it has adequate arrangements in place to ensure efficient clearing or settlement (as the case may be) of the transactions.

Supervision manual (SUP)

This applies.

Enforcement manual (ENF)

This applies.

Decision making manual (DEC)

This applies.

Redress

Dispute resolution: Complaints sourcebook (DISP)

ATS operators are subject to the compulsory jurisdiction of the Financial Ombudsman Service.
However, a firm which notifies the FSA under DISP 1.1.7 that it does not conduct business with eligible complainants (persons eligible to have a complaint considered under the Financial Ombudsman Service, as defined in DISP 2.4) will be exempt from the rules on complaint handling procedures for firms (DISP 1.2 to DISP 1.7) and from the Financial Ombudsman Funding rules ( FEES 5 ).

Redress

Compensation sourcebook (COMP)

COMP applies to all firms. However, ATS operators that do not conduct business that could give rise to a protected claim by an eligible claimant as defined and have no reasonable likelihood of doing so can gain exemption under COMP 13.3 from some compensation scheme levies.

Complaints against the FSA (COAF)

This applies.

Specialist sourcebooks

Collective Investment Schemes Sourcebook (CIS)

ECO applies to an ATS operator that is an electronic commerce activity provider.
REC does not apply to an ATS operator.
The other specialist sourcebooks are likely to be of limited relevance to an ATS operator in respect of its operation of an ATS.

Credit Unions (CRED)

Electronic money (ELM)

E-commerce Directive (ECO)

Lloyd's (LLD)

Professional firms (PROF)

Recognised Investment Exchanges and Recognised Clearing Houses (REC)

Listing, Prospectus and Disclosure

Listing Rules, LR

This may apply if the firm is applying for listing in the United Kingdom, is a listed issuer in the United Kingdom, is a sponsor or is applying for approval as a sponsor.

Prospectus Rules, PR

This may apply if the firm makes an offer of transferable securities to the public in the United Kingdom or is seeking the admission to trading of transferable securities on a regulated market situated or operating in the United Kingdom.

Disclosure Rules and Transparency Rules, DTR

This may apply if the firm is an issuer, any class of whose financial instruments have been admitted to trading on a regulated market, or are the subject of an application for admission to trading on a regulated market, other than issuers who have not requested or approved admission of their financial instruments to trading on a regulated market.

Special guides

Service companies (SERV)

This applies to a service company that operates an ATS.

Energy market participants (EMPS)

This applies to an energy market participant that operates an ATS.

Oil market participants (OMPS)

This applies to an oil market participant that operates an ATS.

01/03/2006

MAR 5 Annex 1

Illustrative form of requirements: Alternative Trading Systems

01/12/2004

Fair and orderly trading

The firm must, in relation to the operation of an ATS, have appropriate arrangements in place designed to ensure:

(a)

efficient pricing and the equitable treatment of users;

(b)

a trading methodology that enables fair and orderly trading; and

(c)

that sufficient information about quotes, orders and completed transactions is made available to users.

Publication of pre-trade information

(1)

This requirement only applies in relation to shares traded on an ATS and only if those shares are also traded on a UK RIE or a regulated market.

(2)

The firm must, in relation to the operation of an ATS, have appropriate arrangements in place to make publicly available information about quotes or orders or both relating to shares traded on the ATS that the ATS displays or advertises to users.

Publication of post-trade information

(1)

This requirement only applies in relation to investments traded on an ATS if those investments, or investments that are substantially similar in nature, are traded on a UK RIE, a regulated market or an EEA commodities market.

(2)

The firm must, in relation to the operation of an ATS, have appropriate arrangements in place to make publicly available information about the price, volume and time of completed transactions for investments traded on the ATS. 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.

Method of publication

Information about quotes, orders or transactions shall be treated as being publicly available under requirements 2 and 3 if it is available on reasonable commercial terms. The firm may make information publicly available under those requirements by publishing the information itself (for example, by posting data on a web-site) or by arranging with a third party (such as an information vendor, regulated market or consolidated quotation system) to publish the information.

Timing of publication

(1)

For the purposes of requirements 1, 2 and 3, information about quotes, orders and transactions should be made available in a timely manner. In particular, information should be made available to users and to subscribers close to the time when the quote or order is given or the transaction is executed. Information may be made available to persons other than users or subscribers with a reasonable delay.

(2)

The firm may make information about a large order, quote or transaction available to users under requirement 1 or publicly available under requirement 2 or 3 at a time later than that specified in (1), but only to the extent reasonably necessary to protect the interests of the relevant user who placed the order, gave the quote or executed the transaction.

Monitoring of trading

(1)

The firm must, in relation to the operation of an ATS :

(a)

have appropriate arrangements in place that enable it to monitor transactions undertaken on the ATS to identify suspected breaches of any rules relating to fair and orderly trading on the ATS and conduct that may constitute market abuse;

(b)

report suspected material breaches of its rules relating to fair and orderly trading on the ATS or suspected market abuse to the FSA and other appropriate organisations; and

(c)

supply relevant information to the FSA as soon as practicable regarding the suspected breaches or suspected market abuse and provide full assistance to the FSA in investigating the suspected breach or suspected market abuse.

(2)

The functions referred to in (1) may be performed by the firm itself or by another person (such as the operator of a regulated market for the particular investment ) under a formal arrangement with the firm .

(3)

In (1), "rules" includes protocols, procedures or terms of, or established under, any agreement between the firm and a user.

Meaning of "appropriate arrangements"

In requirements 1, 2, 3 and 6, "appropriate" means appropriate having regard to the nature of the system, the nature and liquidity of investments traded on the system, the experience of users, the extent to which the wider market in the particular investment involves private customers, and the significance of the system in the overall market for the investment and, also in relation to requirement 6, the susceptibility of the investment traded to market abuse.

Access to sufficient publicly available information

(1)

The firm must, in relation to the operation of an ATS, provide, or be reasonably satisfied that there is publicly available, sufficient information to enable users who are customers to make a reasonably informed judgement about the value of each investment traded on the system and the risks associated with that investment.

(2)

In (1), "sufficient" means sufficient taking into account the nature and experience of users of the system who are customers and the type of investment traded on the system.

(3)

For the purposes of (1), if an investment is admitted to trading on an RIE , a regulated market or an EEA commodities market (and is not suspended from trading on the RIE or market), the firm may be reasonably satisfied that there is publicly available sufficient information about that investment to enable users who are customers to make a reasonably informed judgement about the investment.

01/12/2004

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.

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

01/04/2005

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