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  • MAE-4 MAE-4 Instruments, Transactions and Contracts

    • MAE-4.1 MAE-4.1 Listing of Contracts and Instruments

      • MAE-4.1.1

        No licensed exchange or licensed market operator shall without the approval of the CBB, list, delist, or permit the trading of:

        (a) Any securities, contracts, instruments or transactions;
        (b) Any right, option or derivative in respect of any debentures, stocks or shares;
        (c) Any right under a contract for differences or under any other contract the purpose or purported purpose of which is to secure a profit or avoid a loss by reference to fluctuations in:
        (i) The value or price of any debentures, stocks or shares;
        (ii) The value or price of any group of debentures, stocks or shares; or
        (iii) An index of any debentures, stocks, or shares.
        Amended: April 2013

      • MAE-4.1.2

        The CBB may grant approval for a licensed exchange or licensed market operator to list, delist or permit the trading of any contract or instrument, or any class of contracts or instruments referred to in Paragraph MAE-4.1.1, subject to such conditions or restrictions as the CBB may deem fit to impose by notice in writing to the licensed exchange or licensed market operator.

        Amended: April 2016

    • MAE-4.2 MAE-4.2 Listing of Licensed Exchanges on Securities Market

      • MAE-4.2.1

        The securities of a licensed exchange shall not be listed for quotation on a securities market that is operated by the licensed exchange or any of its related companies unless the licensed exchange and the operator of the securities market have entered into such arrangements as the CBB may require:

        (a) For dealing with possible conflicts of interest that may arise from such listing; and
        (b) For the purpose of ensuring the integrity of the trading of the securities of the licensed exchange on the securities market.

      • MAE-4.2.2

        Where the securities of a licensed exchange are listed for quotation on a securities market operated by the licensed exchange or any of its related companies, the listing rules of the securities market shall be deemed to allow the CBB to act in place of the operator of the securities market in making decisions and taking action, or to require the operator of the securities market to make decisions and to take action on behalf of the CBB on:

        (a) The admission or removal of the licensed exchange to or from the official list of the securities market; and
        (b) Granting approval for the securities of the licensed exchange to be or stopping or suspending the securities of the licensed exchange from being listed for quotation or quoted on the securities market.

      • MAE-4.2.3

        The CBB may, by notice in writing to the operator of the securities market:

        (a) Modify the listing rules of the securities market for the purpose of their application to the listing for quotation or trading of the securities of the licensed exchange; or
        (b) Waive the application of any listing rule of the securities market to the licensed exchange.

    • MAE-4.3 MAE-4.3 Suspension of Securities

      • MAE-4.3.1

        Where the CBB is of the opinion that it is necessary to prohibit trading in particular securities or contracts listed or traded on a licensed exchange or licensed market operator, as the case may be;

        (a) In order to protect persons buying or selling the securities or contracts; or
        (b) In the interests of the public;

        the CBB may give notice in writing to the licensed exchange or licensed market operator stating that it is of that opinion and setting out the reasons for its opinion.

      • MAE-4.3.2

        If after the receipt of the notice given under Paragraph MAE-4.3.1, the licensed exchange or licensed market operator fails to take any action in relation to those securities or contracts on that market and the CBB continues to be of the opinion that it is necessary to prohibit trading in those securities or contracts on that market, the CBB may by notice in writing to the licensed exchange or licensed market operator, prohibit trading in those securities or contracts on that market for such period, as is specified in the notice.

      • MAE-4.3.3

        Where the CBB gives a notice to a licensed exchange or licensed market operator under Paragraph MAE-4.3.2, the CBB shall:

        (a) At the same time send a copy of the notice to the issuer of such security or participant, as the case may be; and
        (b) As soon as practicable, furnish to the licensed exchange or licensed market operator a written report setting out the reasons for giving the notice.
        Amended: July 2016

    • MAE-4.4 MAE-4.4 Emergency Powers of the CBB

      • MAE-4.4.1

        Where the CBB has reason to believe that an emergency exists, or thinks that it is necessary or expedient in the interests of the public or a section of the public or for the protection of investors, the CBB may direct by notice in writing a licensed exchange or licensed market operator to take such action as it considers necessary to maintain or restore orderly trading in securities or futures contracts or any class of securities or futures contracts.

      • MAE-4.4.2

        Without prejudice to MAE-4.4.1, these activities which the CBB may direct a licensed exchange or licensed market operator to take shall include:

        (a) Terminating or suspending trading on the licensed exchange or licensed market operator;
        (b) Confining trading to liquidation of securities or futures contracts positions;
        (c) Ordering the liquidation of all positions or any part thereof or the reduction in such positions;
        (d) Limiting trading to a specific price range;
        (e) Modifying trading days or hours;
        (f) Altering conditions of delivery;
        (g) Fixing the settlement price at which positions are to be liquidated;
        (h) Requiring any person to act in a specified manner in relation to trading in securities or futures contracts or any class of securities or futures contracts;
        (i) Requiring margins or additional margins for any securities or futures contracts; and
        (j) Modifying or suspending any of the business rules of the licensed exchange or licensed market operator.

      • MAE-4.4.3

        Where the licensed exchange or licensed market operator fails to comply with any direction of the CBB under Paragraph MAE-4.4.1 within such time as is specified by the CBB, the CBB may:

        (a) Set margin levels in any securities or futures contract or class of securities or futures contracts to cater for the emergency;
        (b) Set limits that may apply to market positions acquired in good faith prior to the date of the notice issued by the CBB; or
        (c) Take such action as the CBB may deem fit to maintain or restore orderly trading in any securities or futures contracts or class of securities or futures contracts, or liquidation of any position in respect of any securities or futures contract or class of securities or futures contracts.
        Amended: April 2016

      • MAE-4.4.4

        In this section "emergency" means any threatened or actual market manipulation or cornering, and includes:

        (a) Any act of any government affecting a commodity or securities;
        (b) Any major market disturbance which prevents the market from accurately reflecting the forces of supply and demand for such commodity or securities; or
        (c) Any undesirable situation or practice which in the opinion of the CBB, constitutes an emergency.

      • MAE-4.4.5

        The CBB may modify any action taken by a licensed exchange under Paragraph MAE-4.4.1, including the setting aside of that action.

    • MAE-4.5 MAE-4.5 Additional Powers of the CBB in Respect of Auditors

      • MAE-4.5.1

        If an auditor of a licensed exchange or licensed market operator in the course of the performance of his duties becomes aware of:

        (a) Any matter which in his opinion, adversely affects or may adversely affect the financial position of the licensed exchange or licensed market operator to a material extent;
        (b) Any matter which in his opinion, constitutes or may constitute a breach of the CBB Law and regulations or an offence involving fraud or dishonesty; or
        (c) Any irregularity that has or may have a material effect upon the accounts of the licensed exchange or licensed market operator, including any irregularity that affects or jeopardises or may affect or jeopardise, the funds or property of investors in securities or futures contracts,

        the auditor shall immediately send to the CBB a written report of the matter or the irregularity.

        Amended: April 2016

      • MAE-4.5.2

        An auditor of a licensed exchange or licensed market operator shall not be, in the absence of malice on his part, liable to any action for defamation at the suit of any person in respect of any statement made in his report under Paragraph MAE-4.5.1.

      • MAE-4.5.3

        Paragraph MAE-4.5.2 shall not restrict or affect any right, privilege or immunity that the auditor of a licensed exchange or licensed market operator may have as a defendant in an action for defamation.

      • MAE-4.5.4

        The CBB may impose all or any of the following duties on an auditor of a licensed exchange or licensed market operator:

        (a) A duty to submit such additional information and reports in relation to his audit as the CBB considers necessary;
        (b) A duty to enlarge, extend or alter the scope of his audit of the business and affairs of the licensed exchange or licensed market operator;
        (c) A duty to carry out any other examination or establish any procedure in any particular case;
        (d) A duty to submit a report on any matter arising out of his audit, examination or establishment of procedure referred to in Paragraph MAE-4.5.4 (b) or (c), and the auditor shall carry out such duties.

      • MAE-4.5.5

        The licensed exchange or licensed market operator shall remunerate the auditor in respect of the discharge by him of all or any of the duties referred to in Paragraph MAE-4.5.4.

    • MAE-4.6 MAE-4.6 Registration of Market Maker

      • Eligibility

        • MAE-4.6.1

          A licensed exchange or licensed market operator must ensure that a licensee meets the following requirements prior to being registered as a market maker:

          (a) The licensee is incorporated in the Kingdom of Bahrain;
          (b) The licensee must be licensed by the CBB as a Bank or as an Investment Firm(Category 1 or Category 2) or as a Broker-Dealer under CBB Rulebook Volume 6; and
          (c) The licensee is a member of the licensed exchange or licensed market operator.
          Added: January 2019

        • MAE-4.6.2

          A licensed exchange or licensed market operator must formulate its own objective eligibility criteria for registration of market maker. The criteria, at the minimum, must include;

          (a) Capital requirement;
          (b) Infrastructure requirements;
          (c) Trading and market making experience;
          (d) Business continuity arrangements;
          (e) Risk management policy including settlement guarantee mechanism;
          (f) Rights and obligations of the market maker including quoting obligations, inventory size, order type and minimum order size; and
          (g) Terms and conditions under which market making may be terminated;
          Added: January 2019

        • MAE-4.6.3

          A licensed exchange or licensed market operator may have regard to the following matters in determining whether an applicant has satisfied the eligibility criteria:

          (a) Adequate financial capital and qualified technical and administrative staff to practice market making;
          (b) Separation between market making and any other activities that the member is licensed to practice in terms of organisational, technical, financial and administrative arrangements. Evidence thereof may be submitted by the member through the following;
          (i) The adopted mechanism to separate the market making from other licensed activities;
          (ii) The staff assigned to perform market making activities;
          (iii) Experience and qualification of technical and administrative staff assigned to perform market making activities;
          (c) Details of risk management systems and internal control procedures.
          Added: January 2019

        • MAE-4.6.4

          A licensee, as specified in Paragraph MAE-4.6.1, desirous of undertaking market making activity must apply to the licensed exchange or licensed market operator for registration as a market maker.

          Added: January 2019

        • MAE-4.6.5

          A licensee must demonstrate to the satisfaction of the licensed exchange or licensed market operator that it is suitably qualified to undertake market making activity.

          Added: January 2019

        • MAE-4.6.6

          A licensed exchange or licensed market operator may, prior to issuing its consent for registration of a member as a market maker, may conduct on-site inspection of the member to ensure the availability of requisite systems, processes and infrastructure for undertaking market making activity.

          Added: January 2019

        • MAE-4.6.7

          If the licensed exchange or licensed market operator is satisfied that the member is eligible to carryout market making activities, the licensed exchange or licensed market operator may appoint the member as a market maker and enter into a market maker agreement with the member specifying the date of commencement of its term as market maker.

          Added: January 2019

        • MAE-4.6.8

          The market maker agreement referred to in Paragraph MAE-4.6.7 may at the minimum, include the following terms and conditions:

          (a) Rights and obligations of the market maker;
          (b) Duration of the market maker agreement;
          (c) Conditions under which market maker agreement may be terminated;
          (d) Time window during trading hours that the market maker should be obliged to ensure presence on the order book;
          (e) The maximum spread between the bid and offer price that market maker should maintain; and
          (f) Minimum, maximum and normal order size with agreed specifications.
          Added: January 2019

      • Market Making Scheme

        • MAE-4.6.9

          A licensed exchange or licensed market operator must ensure that:

          (a) The market making scheme is objective, transparent, non-discretionary and non-discriminatory and must not give rise to disorderly market conditions or market abuse;
          (b) The transactions carried out under the market making scheme are solely for the purpose of enhancing liquidity and regularity of trading in illiquid securities;
          (c) The scheme does not compromise on market integrity and risk management;
          (d) All necessary systems and processes are in place to monitor market abuse and manipulation including collusion between members indulging in trades with an objective to enhance liquidity artificially;
          (e) The activities of a market maker is continuously monitored for effective compliance with applicable law, rules and regulations;
          (f) Orderly trading conditions are maintained and the minimum set of requirements to be met by the market maker in terms of presence, size and spread under normal trading conditions are adhered to;
          (g) The number of market makers in a market making scheme is not restricted; and
          (h) The CBB is informed of any violations of the provisions of applicable law, rules and regulations.
          Added: January 2019

        • MAE-4.6.10

          A licensed exchange or licensed market operator must put in place the internal procedures and controls to regulate the activity of market making. Such procedures and controls, at the minimum, must include:

          (a) The technical requirements;
          (b) The trading and settlement mechanism relating to the orders of a market maker;
          (c) The type and amount of settlement guarantees required for practising the activity of market making;
          (d) The obligations of a market maker in connection with providing liquidity;
          (e) Determine the list of securities eligible for market making;
          (f) Mechanism to identify the market maker's orders/trades in order to ensure separation between brokerage and market making activities performed by the member;
          (g) Reporting requirements by market makers and issuers; and
          (h) Disclosure requirements by market makers and issuers.
          Added: January 2019

        • MAE-4.6.11

          A licensed exchange or licensed market operator must review and approve the market making agreement entered between an issuer of listed security and a market maker. While assessing the market making agreement, the licensed exchange or licensed market operator must take into account the requirements contained in Section MIR-4.19.

          Added: January 2019

        • MAE-4.6.12

          A licensed exchange or licensed market operator must at all times ensure that a market maker maintains a level of financial resources, risk management, compliance and internal control requirements that are commensurate with the scale and complexity of their business activities.

          Added: January 2019

        • MAE-4.6.13

          A licensed exchange or licensed market operator may lay down additional criteria for market makers as risk containment measure.

          Added: January 2019

      • Temporary Suspension of Market Making Activity

        • MAE-4.6.14

          A licensed exchange or licensed market operator must specify the exceptional circumstances wherein a market maker's obligation to provide liquidity on a regular and predictable basis does not apply.

          Added: January 2019

        • MAE-4.6.15

          A licensed exchange or licensed market operator may have regards to the following situations in determining exceptional circumstances referred to under Paragraph MAE-4.6.14:

          (a) A situation of extreme volatility;
          (b) Disorderly trading conditions where the maintenance of fair, orderly and transparent execution of trades is compromised, and evidence of any of the following is provided;
          (i) the performance of the licensed exchange or licensed market operator system being significantly affected by delays and interruptions;
          (ii) force majeure or cyber sabotage.
          (c) Where the market maker's ability to maintain prudent risk management practices is prevented by any one of the following;
          (i) technological issues, including problems with the data feed or other systems to carry out market making; and
          (ii) risk management issues in relation to capital requirement, margining and access to clearing.
          Added: January 2019

        • MAE-4.6.16

          A licensed exchange or licensed market operator must set out clear procedures for resumption of normal trading after the exceptional circumstance have ceased to exist and must make those procedures publicly available.

          Added: January 2019

        • MAE-4.6.17

          A licensed exchange or licensed market operator must make public the occurrence of the exceptional circumstances referred to under Paragraph-4.6.14 and, as soon as technically possible, the resumption of their normal trading after the exceptional circumstances have ceased to exist.

          Added: January 2019

      • Deregistration of Market Maker

        • MAE-4.6.18

          A licensed exchange or licensed market operator must set out the requirements for deregistration of a market maker.

          Added: January 2019

        • MAE-4.6.19

          A market maker intending to surrender its registration, must submit a written request and seek prior written approval from the licensed exchange or licensed market operator in the manner prescribed by the rules and regulations of the licensed exchange or licensed market operator.

          Added: January 2019

      • Suspension and Cancellation of Registration

        • MAE-4.6.20

          A licensed exchange or licensed market operator must restrict or suspend activities of market maker or cancel its registration where the market maker;

          (a) Is found involved in activities that are not commensurate with the responsibilities assigned to the market maker or are detrimental to the interest of markets and investors;
          (b) Fails to perform its duties in accordance with the applicable rules and regulations of the licensed exchange or licensed market operator; and
          (c) Fails to comply with any of the eligibility criteria and/or the conditions set out at the time of registration;
          Added: January 2019

        • MAE-4.6.21

          Where the CBB is satisfied that a market maker has contravened the CBB Law, rules and regulations, the CBB may if it thinks it is necessary in the interest of the markets or for the protection of investors, by notice in writing direct the licensed exchange or licensed market operator to restrict, suspend or cancel the registration of the market maker.

          Added: January 2019

        • MAE-4.6.22

          A licensed exchange or licensed market operator must disseminate to the markets as soon as possible the information relating to imposition of restriction, suspension or cancellation of registration on a market maker.

          Added: January 2019

      • Disclosure, Notification and Reporting

        • MAE-4.6.23

          A licensed exchange or licensed market operator must publish on its website the market making rules, the name of the members that have been registered as market makers, name of the issuer and market maker who have entered into market making agreement and the security in which the market maker undertakes market making.

          Added: January 2019

        • MAE-4.6.24

          A licensed exchange or licensed market operator must notify the CBB immediately in the following events:

          (a) Whenever a market maker agreement is entered into between a member and the licensed exchange or licensed market operator along with a copy of the agreement and details of the trading account number which the member uses for the purpose of market making;
          (b) Where a member has surrendered its registration as a market maker; and
          (c) The licensed exchange or licensed market operator takes disciplinary action, suspend activities or revokes the registration of a market maker.
          Added: January 2019

        • MAE-4.6.25

          A licensed exchange or licensed market operator must submit a monthly report, within 10 business days from the end of the month, summarizing the market making activities undertaken by market makers, in the format specified by the CBB.

          Added: January 2019