Entire Section

  • COB 9.4 COB 9.4 Investment criteria

    • COB 9.4.1 COB 9.4.1

      An ATS Operator must ensure in respect of every Investment traded on its facility that:

      (a) only Investments which meet the requirements in (i), (ii) or (iii) are traded on its facility:
      (i) in the case of Securities, the Securities are admitted to trading on an Authorised Market Institution or other Regulated Exchange;
      (ii) in the case of Security Tokens that do not meet the criteria in (i):
      (A) there is a current Approved Prospectus relating to the Security Tokens;
      (B) the ATS Operator has taken adequate steps before admitting the Security Tokens to trading, to satisfy itself that both the Security Tokens and the relevant Reporting Entity meet the general eligibility requirements in MKT section 9.3; and
      (C) the ATS Operator has adequate systems and controls in place to effectively monitor and enforce a Reporting Entity’s compliance with the requirements in MKT Chapter 9B; or
      (iii) in the case of Derivatives, the instruments meet the contract specification criteria set out in AMI Rule 6.3.2;
      (b) there is sufficient information relating to the Investments traded on the facility available to members and other Persons having access to the facility through such members to enable such Persons to make informed decisions relating to such Investments; and
      (c) if it is an Investment that references to an underlying benchmark or index provided by a Price Information Provider, the requirements in COB Rule 9.4.2 are met.
      [Added] DFSA RM123/2013 (Made 13th June 2013) [VER22/07-13]
      [Amended] DFSA RMI311/2021 (Made 30th June 2021). [VER39/10-21]

      • COB 9.4.1 Guidance

        1. A Reporting Entity of Security Tokens that are admitted to trading by an ATS Operator under COB Rule 9.4.1(a)(ii) will be subject to the requirements imposed on Reporting Entities in MKT. An ATS Operator should therefore assess whether a prospective Reporting Entity is capable of meeting those requirements before admitting its Security Tokens to trading.


        Derived from DFSA RMI311/2021 (Made 30th June 2021). [VER39/10-21]

    • Use of price information providers

      • COB 9.4.2 COB 9.4.2

        (1) An ATS Operator may only trade Investments that reference to an underlying benchmark or index provided by a Price Information Provider where it has undertaken appropriate due diligence to ensure that the Price Information Provider, on an on-going basis, meets the requirements set out in (3).

        (2) A Price Information Provider is a price reporting agency or an index provider which constructs, compiles, assesses or reports, on a regular and systematic basis, prices of Investments, rates, indices, commodities or figures, which are made available to users.

        (3) For the purposes of (1), the Price Information Provider must:

        (a) have fair and non-discriminatory procedures for establishing prices of Investments which are made public.
        (b) demonstrate adequate and appropriate transparency over the methodology, calculation and inputs to allow users to understand how the benchmark or index is derived and its potential limitations;
        (c) where appropriate, give priority to concluded transactions in making assessments and adopt measures to minimise selective reporting;
        (d) be of good standing and repute as an independent and objective price reporting agency or index provider;
        (e) have a sound corporate governance framework;
        (f) have adequate arrangements to avoid its staff having any conflicts of interest where such conflicts have, or are likely to have, a material adverse impact on price establishment process; and
        (g) adequate complaint resolution mechanisms to resolve any complaints about the Price Information Provider's assessment process and methodology.
        [Added] DFSA RM123/2013 (Made 13th June 2013) [VER22/07-13]

        • COB 9.4.2 Guidance

          An ATS Operator, when assessing the suitability of a Price Information Provider (the provider), should take into account factors such as:

          a. the provider's standing and reliability in the relevant physical or derivatives markets as a credible price reporting agency;
          b. the quality of corporate governance adopted, covering areas such as independent members of the board, independence of its internal audit and risk management function;
          c. whether the methodologies and processes (including any material changes to such methodologies and processes) adopted by the provider for the purposes of pricing are made publicly available;
          d. whether there are adequate procedures adopted to ensure that conflicts between the provider's commercial interests and those of users of its services, including those of its Employees involved in pricing process, are adequately addressed, including through codes of ethics;
          e. whether there is a clear conveyance to its users of the economic realities of the underlying interest the Price Information Provider seeks to measure; and,
          f. the degree to which the Price Information Provider has given consideration to the characteristics of the underlying interests measured, such as:
          •   the size and liquidity: Whether the size of the market informs the selection of an appropriate compilation mechanism and governance processes. For example, a benchmark or index that measures a smaller market may be impacted by single trades and therefore be more prone to potential manipulation, whereas a benchmark for a larger market may not be well represented by a small sample of participants;
          •   the relative market size. Where the size of a market referencing a benchmark is significantly larger than the volume of the underlying market, the potential incentive for benchmark manipulation to increase; and
          •   Transparency: Where there are varying levels of transparency regarding trading volumes and positions of market participants, particularly in non-regulated markets and instruments, whether the benchmark represents the full breadth of the market, the role of specialist participants who might be in a position to give an overview of the market, and the feasibility, costs and benefits of providing additional transparency in the underlying markets.
          [Added] DFSA RM123/2013 (Made 13th June 2013) [VER22/07-13]