In Bulgarian State Gazette issue № 15 as of 16.02.2018 was published the new Markets in Financial Instruments Act (MFIA). It introduces the requirements of Directive 2014/65 / EU in order to increase transparency, better protect investors, reinforce confidence, address unregulated areas, and ensure that supervisors are granted adequate powers to fulfil their tasks. It should be noted that the capital adequacy and liquidity requirements of investment firms remain the same as they have been so far. MFIA provides the essential regulatory and supervisory powers to be exercised by the Financial Supervision Commission as a collective body, and the deputy chairman of the commission – Head of “Investment Supervision” has mainly supervisory powers of operational and current character.
On the other hand, the range of financial instruments referred to in Art. 4 of the MFIA is extended by adding, for example, goods that can be physically settled when they are traded on an organized trading facility (OTF), with the exception of wholesale energy products traded in OTFs for which physical delivery settlement is to be determined, in accordance with Art. 5 of the Delegated Regulation (EU) 2017/565.
The new MFIA introduces detailed requirements for good reputation, professional qualifications and experience.
The next significant change is that the MFIA introduces the possibility for the investment intermediary to enter into contracts with tied agents. According to Art. 33 of the MFIA, a tied agent is a natural person or a commercial company which, for the purpose of promoting sales of the services of an investment firm, provides and performs for remuneration on its behalf and on its full and unconditional liability one or more of the following investment services and activities:
1. inviting customers to enter into transactions;
2. acceptance and transmission of orders by customers;
3. offering financial instruments;
4. providing investment advice to clients or potential clients regarding transactions in financial instruments or providing advice on the services offered by the investment intermediary.
Another new requirement contained in the MFIA is the introduction of algorithmic trading requirements set out in Art. 102 of the law. According to Art. 30 of the Supplementary Provisions of the MFIA – “Algorithmic trading” means trading in financial instruments where a
computer algorithm automatically determines individual parameters of orders such as whether to initiate the order, the timing, price or quantity of the order or how to manage the order after its submission, with limited or no human intervention as defined in Article 18 of Delegated Regulation (EU) 2017/565. Algorithmic trading does not include any system that is only used for the purpose of routing orders to one or more trading venues or for the processing of orders involving no determination of any trading parameters or for the confirmation of orders or the post-trade processing of executed transactions.
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