Entire Section

  • AMI 5A AMI 5A Additional Requirements for Operating a Facility for Investment Tokens

    • AMI 5A.1 AMI 5A.1 Application

      • AMI 5A.4 AMI 5A.4 Safe Custody of Investment Tokens

        • AMI 5A.2 AMI 5A.2 Technology and Governance Requirements

          • AMI 5A.5 AMI 5A.5 Technology Audit Reports

            • AMI 5A.3 AMI 5A.3 Operating a Facility for Investment Tokens that Permits Direct Access

              • AMI 5A.3.2 AMI 5A.3.2

                (1) Without limiting the generality of the systems and controls obligations of the Authorised Market Institution, an Authorised Market Institution must have in place adequate systems and controls to address market integrity, AML, CTF and investor protection risks in permitting a Direct Access Member to access its facility, including procedures to:
                (a) identify the ultimate beneficial owner of a Direct Access Member, where the Member is a Body Corporate;
                (b) ensure that appropriate customer due diligence sufficient to address AML and CTF risks has been conducted on each Direct Access Member, before permitting that Member to access its facility;
                (c) detect and address market manipulation and abuse; and
                (d) ensure that there is adequate disclosure relating to the Investment Tokens that are traded on the facility, through prospectus and on-going disclosure under MKT chapters 2, 4 and 6.
                (2) An Authorised Market Institution must have adequate controls and procedures to ensure that trading in Investment Tokens by Direct Access Members does not pose any risks to the orderly and efficient functioning of the facility’s trading system, including controls and procedures to:
                (a) mitigate counterparty risks that may arise from defaults by Direct Access Members, through adequate collateral management measures, such as margin requirements, based on the settlement cycle adopted by the Authorised Market Institution;
                (b) identify and distinguish orders that are placed by Direct Access Members, and, if necessary, enable the Authorised Market Institution to stop orders of, or trading by, such Members;
                (c) prevent Direct Access Members from allowing any other Persons to access the facility through that Member’s access; and
                (d) ensure that Direct Access Members fully comply with the Business Rules of the facility and promptly address any gaps and deficiencies that are identified.
                (3) An Authorised Market Institution must have adequate resources and mechanisms to carry out front-line monitoring of the trading activities of Direct Access Members.
                (4) An Authorised Market Institution must ensure that, to the extent that any of the systems and controls referred to in (1) are embedded within, or otherwise facilitated through DLT, they must be included within the scope of the annual audit and written report required under AMI Rule 5A.5.
                Derived from DFSA RMI310/2021 (Made 30th June 2021). [VER20/10-21]

                • AMI 5A.1.1 AMI 5A.1.1

                  This chapter applies to an Authorised Market Institution Operating a Facility for Investment Tokens.

                  Derived from DFSA RMI310/2021 (Made 30th June 2021). [VER20/10-21]

                  • AMI 5A.3.3 AMI 5A.3.3

                    When an Authorised Market Institution Executes a Transaction in Investment Tokens for a Direct Access Member, the Authorised Market Institution must comply with the requirements relating to confirmation notes that would apply to an Authorised Firm under COB section 6.9 and COB App 3 section A3.1.

                    Derived from DFSA RMI310/2021 (Made 30th June 2021). [VER20/10-21]

                    • AMI 5A.4.1 AMI 5A.4.1

                      Without limiting the generality of AMI section 5.10, where an Authorised Market Institution’s obligations include making provision for the safeguarding and administration of Security Tokens belonging to Members and other participants on its facility, it must ensure that:

                      (1) where its safe custody arrangements involve acting as a Digital Wallet Service Provider, it complies with the same requirements that would apply to an Authorised Firm carrying on such activities under COB section 14.3 and the Client Asset provisions in COB sections 6.11, 6.12 and 6.13;
                      (2) where it appoints a Third Party Digital Wallet Service Provider to Provide Custody for Investment Tokens traded or cleared on its facility, that person is either:
                      (a) an Authorised Firm permitted to be a Digital Wallet Service Provider; or
                      (b) a firm that is regulated by a Financial Services Regulator to an equivalent level as that provided for under the DFSA regime for Providing Digital Wallet Services.
                      Derived from DFSA RMI310/2021 (Made 30th June 2021). [VER20/10-21]

                      • AMI 5A.2.1 AMI 5A.2.1

                        Without limiting the generality of the technology resources requirements in AMI Rule 5.5.5, an Authorised Market Institution must ensure that it meets the requirements that would apply to an Authorised Firm Operating a Facility for Investment Tokens under COB section 14.1.

                        Derived from DFSA RMI310/2021 (Made 30th June 2021). [VER20/10-21]

                        • AMI 5A.5.1 AMI 5A.5.1

                          An Authorised Market Institution must ensure that it meets the requirements relating to technology audit reports that would apply to an Authorised Firm Operating a Facility for Investment Tokens under COB section 14.5.

                          Derived from DFSA RMI310/2021 (Made 30th June 2021). [VER20/10-21]

                          • AMI 5A.3.1 AMI 5A.3.1

                            An Authorised Market Institution must ensure that:

                            (1) it treats each Direct Access Member as its Client;
                            (2) its Business Rules clearly set out:
                            (a) the duties owed by the Authorised Market Institution to the Direct Access Member and how the Authorised Market Institution is held accountable for any failure to fulfil those duties; and
                            (b) the duties owed by the Direct Access Member to the Authorised Market Institution and how the Direct Access Member is held accountable for any failure to fulfil those duties;
                            (3) appropriate investor redress mechanisms are available, and disclosed, to each Member permitted to trade or clear Investment Tokens on its facility, as required under AMI Rule 5.12.2; and
                            (4) its facility contains a prominent disclosure of the risks associated with the use of DLT for trading and clearing Investments, particularly those relating to Digital Wallets and the susceptibility of private cryptographic keys to misappropriation.
                            Derived from DFSA RMI310/2021 (Made 30th June 2021). [VER20/10-21]

                            • AMI 5A.3.2 Guidance

                              To satisfy the DFSA of the matters referred to in AMI Rule 5A.3.2, an Authorised Market Institution should, as a minimum, be able to demonstrate that it has effective procedures built into its DLT or similar technology application being used that enable:

                              (a) the clear identification of each Direct Access Member accessing its facility to trade; and
                              (b) the monitoring of bid and offer prices and volatility for any indications of market manipulation or abuse.
                              Derived from DFSA RMI310/2021 (Made 30th June 2021). [VER20/10-21]

                              • AMI 5A.1.1 Guidance

                                Operating a Facility for Investment Tokens is defined in GLO as Operating an Exchange, Operating a Clearing House or Operating an Alternative Trading System on which Investment Tokens are traded, cleared, or both traded and cleared.

                                Derived from DFSA RMI310/2021 (Made 30th June 2021). [VER20/10-21]