MAR 2
Stabilisation
MAR 2.1
Application and Purpose
- 01/07/2005
Application
MAR 2.1.1
See Notes
This chapter applies to every firm.
- 01/07/2005
MAR 2.1.2
See Notes
This chapter is available to every person who wishes to show that he acted in conformity with:
(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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
(c) are or may be traded under the rules of the International Securities Markets Association; and
the stabilisation or ancillary stabilisation is carried out in accordance with the provisions in MAR 2.4.- 01/07/2005
MAR 2.2.2
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
Table: Article 8 of the Buy-back and Stabilisation Regulation
| Article 8 | |
| Time related conditions for stabilisation | |
| 1. | [Stabilisation] shall be carried out only for a limited time period. |
| 2. | 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. | |
| 3. | 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]. |
| 4. | 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]. |
| 5. | 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
See Notes
Table: Article 9 of the Buy-back and Stabilisation Regulation
| Article 9 | ||
| Disclosure and reporting conditions for stabilisation | ||
| 1. | 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. | ||
| 2. | 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. | |
| 3. | 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. | |
| 4. | 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. | |
| 5. | 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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
Table: Article 10 of the Buy-back and Stabilisation Regulation
| Article 10 | |
| Specific price conditions | |
| 1. | 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. |
| 2. | 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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
(1) A person who in any place outside the United Kingdom acts or engages in conduct:
(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
See Notes
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
See Notes
| 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