- BaFin – Translation -
The present English text is furnished for information purposes only.
The original German text is binding in all respects.

By virtue of the authority conferred by § 20a (5) sentence 1 of the German Securities Trading Act (Wertpapierhandelsgesetz), which was amended by Article 1 no. 7 of the Act of 28 October 2004 (Federal Law Gazette I p. 2630), the Federal Ministry for Finance enacts:

Part 1
Scope

§ 1
Scope

The provisions of this Regulation shall apply to:

1. the definition of circumstances that are material to the valuation of financial instruments within the meaning of § 20a (1) sentence 1 no. 1 of the Securities Trading Act;
2. the definition of false or misleading signals as to the supply of, demand for, or market price of financial instruments or the existence of an artificial price level within the meaning of § 20a (1) sentence 1 no. 2 of the Securities Trading Act;
3. findings of other deceptive conduct within the meaning of § 20a (1) sentence 1 no. 2 of the Securities Trading Act;
4. the definition of conduct that in no case constitutes an infringement of the prohibition against market manipulation within the meaning of § 20a (1) sentence 1 of the Securities Trading Act; and
5. the definition of conduct that is deemed accepted market practice and the procedure for recognising accepted market practice within the meaning of § 20a (2) of the Securities Trading Act.

Part 2

Circumstances that are material to valuation, false or misleading signals or artificial price levels and other deceptive conduct

§ 2
Circumstances material to valuation

(1) Circumstances that are material to valuation within the meaning of § 20a (1) sentence 1 no. 1 of the Securities Trading Act are facts and value judgments that would be taken into account by a reasonable investor [verständiger Anleger] when making an investment decision. Circumstances that can be assumed with sufficient probability to occur in the future shall also be deemed circumstances that are material to valuation.

(2) Insider information that must be disclosed under § 15 (1) sentence 1 of the Securities Trading Act, and decisions or takeovers that must be disclosed under § 10 or § 35 of the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz) are generally deemed to be circumstances that are material to valuation within the meaning of subsection (1).

(3) Circumstances that are material to valuation within the meaning of subsection (1) include but are not limited to:

1. significant co-operative arrangements, the acquisition or sale of a majority interest, and the conclusion, amendment or termination of control and profit and loss transfer agreements and other significant contracts;
2. liquidity problems, over-indebtedness or the reporting of losses in accordance with § 92 of the German Stock Corporation Act (Aktiengesetz);
3. significant inventions, the grant or loss of significant patents and the grant of important licenses;
4. legal disputes and competition law proceedings of particular significance;
5. key personnel changes within the undertaking;
6. strategic business decisions, particularly the withdrawal from or commencement of operations in new core business areas or any realignment of the business.

(4) Circumstances that are material to valuation within the meaning of subsection (1) may also include, but are not limited to:

1. changes to the annual financial statements or interim reports or the key company figures usually derived from such reports;
2. changes to dividend distributions, in particular special dividends, any dividend adjustment or the non-payment of dividends;
3. takeover bids, purchase offers or settlement offers where not already covered by subsection (2);
4. measures affecting capital and financing measures.

§ 3
False or misleading signals or artificial price levels

(1) Indications of false or misleading signals or the fixing of an artificial price level within the meaning of § 20a (1) sentence 1 no. 2 of the Securities Trading Act may include the following non-exhaustive signals:

1. Transactions or orders to trade:

   1. which represent a significant proportion of the daily volume of transactions in the relevant financial instrument on the market concerned, in particular when these activities lead to a significant change in the price of the financial instrument;
   2. through which persons with a significant buying or selling position in a financial instrument lead to significant changes in the price of the financial instrument or related derivative or underlying asset;
   3. which entail position reversals in a short period and represent a significant proportion of the daily volume of transactions in the relevant financial instrument on the market concerned, and might be associated with significant changes in the price of a financial instrument;
   4. which are concentrated within a short time span in the trading session and lead to a price change which is subsequently reversed;
   5. which are undertaken or given at or around a specific time when the reference price for a financial instrument or other assets is calculated and which lead to a change in the reference price, which in turn has an effect on the price or valuation of the relevant financial instrument or asset
2. Orders to trade which change the representation of the best bid or offer prices in a financial instrument, or more generally the representation of the order book available to market participants, and which are removed before they are executed;
3. Transactions that lead to no change in the beneficial ownership of a financial instrument.
   

(2) The following non-exhaustive signals shall also be deemed misleading within the meaning of § 20a (1) sentence 1 no. 2 of the Securities Trading Act:

1. transactions or individual orders to trade that deceive or are likely to deceive others in relation to the supply of or demand for a financial instrument at the time when the reference price for a financial instrument or other product is fixed, particularly if the purchase or sale of financial instruments at the close of trading causes investors who act on the basis of the fixed closing price to be deceived in relation to the true financial situation;
2. transactions or individual orders to trade in financial instruments that are for substantially the same volume and price and are undertaken or given by different parties acting in collaboration, unless such transactions were disclosed in a timely manner in accordance with the applicable market rules; or
3. transactions or individual orders to trade that create a false or misleading impression of commercially feasible turnover.

§ 4
Other deceptive conduct

(1) Other deceptive conduct within the meaning of § 20a (1) sentence 1 no. 3 of the Securities Trading Act includes acts or omissions that mislead or are likely to mislead a reasonable investor about the true economic circumstances, in particular the supply of and demand for a certain financial instrument on a stock exchange or market, and force up or down or maintain the domestic stock exchange or market price of a financial instrument or the price of a financial instrument on a regulated market of another member state of the European Union or another party to the Agreement on the European Economic Area ("EEA Agreement").

(2) Indications of other deceptive conduct also include transactions or individual orders to trade in which the contracting parties or the ordering party or persons closely associated with such parties, either in advance or subsequently:

1. disseminate false or misleading information; or
2. produce or disseminate false, erroneous or distorted financial analyses or investment recommendations, or financial analyses or investment recommendations influenced by financial interests.

(3) Other deceptive conduct also includes, but is not limited to:

1. conduct by a person, or persons acting in collaboration, to secure a dominant position over the supply of or demand for a financial instrument, which has the effect of fixing, directly or indirectly, purchase or sale prices or creating other unfair trading conditions;
2. taking advantage of occasional or regular access to the traditional or electronic media by voicing an opinion or a rumour about a financial instrument or about its issuer while having previously taken positions on that financial instrument, without having simultaneously disclosed that conflict of interest to the public in a proper and effective way.

Part 3

Conduct that in no case constitutes an infringement of the prohibition against market manipulation

§ 5
Conduct in accordance with European law

Trading in own shares pursuant to buy-back programmes and the stabilisation of financial instruments within the meaning of § 20a (3) of the Securities Trading Act in conjunction with Commission Regulation (EC) No. 2273/2003 of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards exemptions for buy-back programmes and stabilisation of financial instruments (Official Journal L 336, p. 33) shall in no case constitute an infringement of the prohibition against market manipulation.

§ 6
Recognition of foreign stabilisation rules

Action may also be taken abroad to stabilise the price of financial instruments that are not admitted to trading on a regulated market of a member state of the European Union or another party to the EEA Agreement and for which no request for admission to trading on such a market has been made, provided such action satisfies the requirements of Regulation (EC) No. 2273/2003 or is undertaken pursuant to the existing rules governing permissible stabilisation measures on the relevant foreign markets, provided such rules are equivalent to the provisions of this Regulation.

Part 4
Accepted market practice

§ 7
Procedures for recognising accepted market practice

(1) If in the course of its regulatory activities the Bundesanstalt für Finanzdienstleistungsaufsicht (Federal Financial Supervisory Authority, or "the Authority") becomes aware of a practice that gives or is likely to give false or misleading signals as to the supply of, demand for or market price of financial instruments, or which leads or is likely to lead to prices being fixed at an artificial level, then the Authority will decide whether to recognise this practice as an accepted market practice within the meaning of § 20a (2) of the Securities Trading Act in accordance with the procedure outlined in subsection (2) and §§ 8 and 9. The Authority will review the accepted market practice on a regular basis and in so doing will particularly consider material changes in the market, such as changed trading rules or any change in market infrastructure. The Authority may change or revoke its acceptance of a market practice with effect for the future. Sections 8 and 9 apply mutatis mutandis to any change or revocation.

(2) If proceedings have already been commenced on the basis of a suspicion of market manipulation, the Authority may, if there is special urgency, make a decision on the individual case without consulting market participants, other authorities or competent foreign authorities as contemplated under § 9, and may decide purely on the basis of the criteria set forth in § 8 (1). In such a case, consultation with market participants, other authorities and competent foreign authorities under § 9 and, if applicable, notification of the decision in accordance with § 10 must take place at a later date. The foregoing shall not affect the powers of the Department of Public Prosecutions (Staatsanwaltschaft).

§ 8
Criteria

(1) In recognising practices as accepted market practices within the meaning of § 20a (2) sentence 2 of the Securities Trading Act, the Authority will consider the following non-exhaustive criteria:

1. whether the practice is sufficiently transparent to the whole market;
2. whether the practice has an impact on market liquidity and efficiency;
3. whether the practice interferes with the operation of market forces and the proper interplay of the forces of supply and demand judged by reference to key parameters, including but not limited to the market conditions prior to the introduction of the market practice, the weighted average price on a given trading day and the daily closing price;
4. whether the practice can be reconciled with 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. whether the practice does justice to 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; and
6. whether the practice jeopardises the integrity of other markets on which the same financial instrument is traded.

(2) The Authority will take into account the outcome of any investigation of the relevant market practice by any domestic or competent authority of another member state of the European Union and other parties to the EEA Agreement, 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 related markets within the European Union and the European Economic Area.

§ 9
Consultation with market participants, authorities and foreign authorities

(1) To the extent necessary in order to reach a proper decision, the Authority shall, before accepting or not accepting the market practice concerned, consult relevant bodies such as issuers, financial services providers, entities that operate markets on which financial instruments are traded, consumer associations and authorities whose fields of activity are affected by acceptance of the market practice. The consultation procedure shall include consultation with the competent authorities of other member states of the European Union and other parties to the EEA Agreement where such competent authorities regulate trading in financial instruments, in particular where they are responsible for regulating markets that are comparable to the market in question.

(2) The Authority will stipulate a reasonable period for the lodgement of submissions under subsection (1). Submissions lodged within the prescribed time will be taken into account in deciding whether to accept a market practice.

§ 10
Notification

(1) The Authority will disclose its acceptance of a market practice by publishing a notice in the electronic version of the Federal Gazette (elektronischer Bundesanzeiger) and on its website. The notice shall describe the conduct that characterises the market practice and include a description of the factors taken into account in determining whether the relevant practice should be regarded as acceptable. Separate reasons must be given for any deviations from accepted market practice on other markets comparable to the relevant market.

(2) The Authority shall transmit its decisions under subsection (1) as soon as possible to the Committee of European Securities Regulators for purposes of immediate publication on its website.

Part 5
Miscellaneous

§ 11
Commencement, repeal

This Regulation will enter into force on the day of its proclamation. The Regulation to Further Define the Prohibition against Price Manipulation (Verordnung zur Konkretisierung des Verbotes der Kurs- und Marktpreismanipulation) of 18 November 2003 (BGBl. I p. 2300) is concurrently repealed.