VFA Exchange Licence – VFAA Class 4
One of the central activities regulated by the VFA Act is the setting up and operation of a VFA exchange. The term VFA exchange refers to any DLT exchange on which only VFAs may be transacted in accordance with the rules of the platform or facility.
The operation of a VFA Exchange requires a Class 4 License and in addition to operating a DLT exchange, would also be permitted to carry out any other VFA Service. The VFA Act highlights the licensing requirements imposed on licensees wishing to operate a VFA exchange in or from within Malta and also outlines the procedures for the application and granting of the said licences.
Ongoing Obligations of VFA Exchange Licence Holders
Once a VFA Exchange License is granted, the Licence Holder has ongoing obligations to observe. These include, but are not limited to, the following:
- Organisational Requirements:
- Have in place governance policies, sound administrative and accounting procedures, internal control mechanisms, risk management and compliance measures.
- Methods to safeguard clients' assets, such as the reconciliation of clients’ money and clients’ assets, appointment of a Custodian.
- Maintaining of an adequate Insurance Policy.
- Supplementary Requirements:
- Carrying out of appropriate research to assess the quality of the VFA traded on its platform.
- Client Record Keeping and Accurate Verification of trades and matching settlement instructions.
- Appointment of a Custodian for the safekeeping of its Assets and any VFA held for the account of its clients.
- Making public the price, volume, and time of the transactions of the VFAs traded.
- Reporting of Suspicious Transactions.
- Ensuring that effective and resilient systems are in place.
- Issuing of clear and transparent byelaws in order to ensure that any VFA being traded on its platform is being traded in a fair, orderly and efficient manner.
- Yearly compliance certificates.
- Synchronisation of the business clocks used to record the date and time of any reportable event.
- Prudential Requirements:
- Ensuring that it maintains at all times the Initial and Ongoing Capital Requirements.
- Internal Capital Adequacy Assessment Process to assess and maintain on an ongoing basis the amounts, types and distribution of internal capital that they consider adequate to cover the nature and level of risks to which it is or might be exposed.
- Liquidity and Fixed Overhead Requirements.
- Conduct of Business Obligations:
- Regulation of Conflict of Interest.
- Implementation of remuneration policies and practices under appropriate internal procedures taking into account the interests of all its Clients.
- Sale Processes and Selling Practices.
- Execution of Clients' Orders.
- Record Keeping, Reporting and Disclosure Requirements:
- Record Keeping and Accounting Records.
- Reporting and Disclosure Requirements.
Fees Applicable for a VFA Exchange Licence
In order to obtain and hold a VFA Exchange Licence in Malta, the Applicant is required to have an initial minimum share capital that is required for authorisation purposes and must be retained at all times, as well as pay a license application and annual supervisory fees in Malta as follows:
|Minimum Share Capital||€730,000|
|Annual Fee||Supervisory Fee - €50,000 for revenue of €1,000,000 + €5,000 for every further tranche of €1,000,000 up to a maximum of €100,000,000|