2.2.1. Minimum capital requirement

An Authorised Market Institution must hold the following minimum capital:

• (a) an amount equal to 6 months' operational expenses; plus
• (b) unless the AFSA directs otherwise, an additional amount of up to a further 6 months' operational expenses.

2.3.1. Conflicts of interest – core obligation

An Authorised Market Institution must take reasonable steps, including the maintenance of adequate systems and controls, governance and internal policies and procedures, to ensure that the performance of its regulatory functions is not adversely affected by its commercial interests. Guidance: regulatory functions of Authorised Market Institution

The regulatory functions of an Authorised Market Institution include, as appropriate:

• its obligations under AMI to monitor and enforce compliance with its membership rules, Business Rules, Direct Electronic Access Rules;

• its obligation to prevent, detect and report market abuse or financial crime; and

• its obligations in respect of admission of Investments to an Official List, to Trading or to Clearing.

2.3.2. Conflicts of interest – identification and management

For the purposes of compliance with AMI 2.3.1, an Authorised Market Institution must:

• (a) identify conflicts between the interests of the Authorised Market Institution, its shareholders, owners and operators and the interests of the Persons who make use of its facilities or the interests of the trading venues operated by it; and
• (b) manage or disclose such conflicts so as to avoid adverse consequences for the sound functioning and operation of the trading venues operated by the Authorised Market Institution and for the Persons who make use of its facilities.

2.3.3. Conflicts of interest – personal account transactions

An Authorised Market Institution must establish and maintain adequate policies and procedures to ensure that its Employees do not undertake personal account transactions in Investments in a manner that creates or has the potential to create conflicts of interest.

2.3.4. Conflicts of interest – code of conduct

An Authorised Market Institution must establish a code of conduct that sets out the expected standards of behaviour for its Employees, including clear procedures for addressing conflicts of interest. Such a code must be binding on Employees.

2.4.1. Sufficient resources

An Authorised Market Institution must have sufficient technology resources to continually operate, maintain and supervise its facilities

2.4.2. Confidentiality

The Authorised Market Institution must take reasonable steps to ensure that its information, records and data are secure and the confidentiality is maintained

2.4.3. Cyber-security

The Authorised Market Institution must take reasonable steps to ensure that its information technology systems are reliable and adequately protected from external attack or incident.

2.4.4. Resources of Members

(1)An Authorised Market Institution must ensure that its Members and other participants on its facilities have sufficient and secure technology resources which are compatible with its own.

(2)The requirements in (1) do not apply to:

1. (a)       an Authorised Crowdfunding Platform (or its Clients);
2. (b)       [intentionally omitted]

2.4.5. On-going monitoring

For the purposes of meeting the requirement in AMI 2.4.1, an Authorised Market Institution must have adequate procedures and arrangements for the evaluation, selection and on-going maintenance and monitoring of information technology systems. Such procedures and arrangements must, at a minimum, provide for:

1. (a) problem management and system change;
2. (b) testing information technology systems before live operations in accordance with the requirements in AMI 2.4.6 and 2.4.7;
3. (c) real time monitoring and reporting on system performance, availability and integrity; and
4. (d) adequate measures to ensure:
5. (i) the information technology systems are resilient and not prone to failure;
6. (ii) business continuity in the event that an information technology system fails;
7. (iii) protection of the information technology systems from damage, tampering, misuse or unauthorised access; and
8. (iv) the integrity of data forming part of, or being processed through, information technology systems.

2.4.6. Testing of technology systems

An Authorised Market Institution must, before commencing live operation of its information technology systems or any updates thereto, use development and testing methodologies in line with internationally accepted testing standards in order to test the viability and effectiveness of such systems. For this purpose, the testing must be adequate for the Authorised Market Institution to obtain reasonable assurance that, among other things:

• (a) the systems enable it to comply with all the applicable requirements, including legislation, on an on-going basis;
• (b) the systems can continue to operate effectively in stressed market conditions;
• (c) the systems have sufficient electronic capacity to accommodate reasonably foreseeable volumes of messaging and orders;
• (d) the systems are adequately scalable in emergency conditions that might threaten the orderly and proper operations of its facility; and
• (e) any risk management controls embedded within the systems, such as generating automatic error reports, work as intended.

2.4.7. Testing relating to Members’ technology systems

(1)     An Authorised Market Institution must implement standardised conformance testing procedures to ensure that the systems which its Members are using to access facilities operated by it have a minimum level of functionality that is compatible with the Authorised Market Institution’s information technology systems and will not pose any threat to fair and orderly conduct of its facilities.

(2)     An Authorised Market Institution must also require its Members, before commencing live operation of any electronic trading system, user interface or a trading algorithm, including any updates to such arrangements, to use adequate development and testing methodologies to test the viability and effectiveness of their systems, to include system resilience and security.

(3)     For the purposes of (2), an Authorised Market Institution must require its Members:

1. (a)      to adopt trading algorithm tests, including tests in a simulation environment which are commensurate with the risks that such a strategy may pose to itself and to the fair and orderly functioning of the facility operated by the Authorised Market Institution; and
2. (b)      not to deploy trading algorithms in a live environment except in a controlled and cautious manner.

(4)    The requirements in (1)-(3) do not apply to:

1. (a)       an Authorised Crowdfunding Platform (or its Clients); or
2. (b)       [intentionally omitted]

2.4.8. Regular review of systems and controls

(1) An Authorised Market Institution must undertake regular review and updates of its information technology systems and controls as appropriate to the nature, scale and complexity of its operations.

(2) For the purposes of (1), an Authorised Market Institution must adopt well defined and clearly documented development and testing methodologies which are in line with internationally accepted testing standards.

2.5.1. Requirement to prepare Business Rules

(1) Save where the AFSA otherwise directs, an Authorised Market Institution must establish and maintain Business Rules governing relations between itself and the participants in the market, including but not limited to:

(a)    Membership Rules, prepared in accordance with AMI 2.6, governing the admission of Members and any other Persons to whom access to its facilities is provided;

(b)    Direct Electronic Access Rules, prepared in accordance with AMI 2.7, setting out the rules and conditions pursuant to which its Members may provide their clients with Direct Electronic Access to the Authorised Market Institution’s trading systems;

(c)     Default Rules, prepared in accordance with either AMI 3.5 or AMI 4.6, governing action that may be taken in respect of unsettled Market Contracts in the event of a Member being, or appearing to be, unable to meet its obligations;

(d)    Admission to Trading Rules, prepared in accordance with AMI 3.2, or Admission to Clearing Rules, prepared in accordance with AMI 4.1, governing the admission of Securities or Units in a Listed Fund, Commodity Derivatives, or Environmental Instruments to trading, or clearing and settlement, as appropriate to its facilities;

(e)    Listing Rules, prepared in accordance with AMI 3.6, setting out the rules and conditions applicable to a Person who wishes to have Securities or Units in a Listed Fund included in an Official List; and

(f)    any other matters necessary for the proper functioning of the Authorised Market Institution and the facilities operated by it.

(2) An Authorised Market Institution must incorporate into its Business Rules the substance of any additional provisions to be found in the COB Rules, with any modifications which seem to the Institution to be appropriate, for the purpose of regulating the conduct of business of a Person referred to in AMI 2.6.1(1)(c) as a Member of the Institution for the purposes of dealing in Commodity Derivatives or Environmental Instruments.

(3)   An Authorised Market Institution must incorporate into its Business Rules the substance of additional provisions to be found in the COB Rules, for the purpose of regulating the conduct of business of a Person referred to in AMI 2.6.1(1)(d) as a Member of the Institution for the purposes of dealing in Security Tokens.

2.5.2. Content and effect of Business Rules

An Authorised Market Institution’s Business Rules must:

• (a) be based on objective criteria;
• (b) be non-discriminatory;
• (c) be clear and fair;
• (d) set out the Members’ and other participants’ obligations:
• (i) arising from the Authorised Market Institution’s constitution and other administrative arrangements;
• (ii) when undertaking transactions on its facilities; and
• (iii) relating to professional standards that must be imposed on staff and agents of the Members and other participants when undertaking transactions on its facilities;
• (e) be made publicly available free of charge;
• (f) contain provisions for the resolution of Members’ and other participants’ disputes and an appeal process from the decisions of the Authorised Market Institution, whether by an internal but independent body or otherwise; and
• (g) contain disciplinary procedures, including any sanctions that may be imposed by the Authorised Market Institution against its Members and other participants; and
• (h) be enforceable against the Members and other participants.

2.5.3. Review, amendment and consultation

The Authorised Market Institution must ensure that appropriate procedures are adopted for it to keep its Business Rules under annual review and to amend them. The procedures must include procedures for consulting users of the Authorised Market Institution's facilities in appropriate cases.

2.5.4. Amendment of rules

Any amendment to an Authorised Market Institution's Business Rules must, prior to the amendment being effective, be:

• (a) made available for market consultation for no less than 30 days; and
• (b) approved by the AFSA.

2.5.5. Waiver of consultation requirement

The AFSA may waive or modify the requirement for market consultation in AMI 2.5.4(a) where it considers it necessary or desirable to do so, including but not limited to, cases of emergency, force majeure, typographical errors, minor administrative matters, or to comply with applicable laws.

2.5.6. Monitoring and enforcing compliance with Business Rules

The Authorised Market Institution must have effective arrangements for monitoring and enforcing compliance with its Business Rules including procedures for:

• (a) prompt investigation of complaints made to the Authorised Market Institution about the conduct of Persons in the course of using the Authorised Market Institution's facilities; and
• (b) where appropriate, disciplinary action resulting in financial and other types of penalties.

2.5.7. Financial penalties

Where arrangements made pursuant to AMI 2.5.6 include provision for requiring the payment of financial penalties, they must include arrangements for ensuring that any amount so paid is applied only in one or more of the following ways:

• (a) towards meeting expenses incurred by the Authorised Market Institution in the course of the investigation of the breach or course of conduct in respect of which the penalty is paid, or in the course of any appeal against the decision of the Authorised Market Institution in relation to that breach or course of conduct; or
• (b) for the benefit of users of the Authorised Market Institution's facilities.

2.5.8. Appeals

Arrangements made pursuant to AMI 2.5.6 must include provision for fair, independent and impartial resolution of appeals against decisions of the Authorised Market Institution.

The requirements in AMI 2.5 do not apply to an Authorised Crowdfunding Platform.

2.6.1. Persons eligible for Membership

(1) An Authorised Market Institution, may only admit as a Member a Person who satisfies admission criteria set out in its Membership Rules and who is either:

(a) an Authorised Firm whose Licence permits it to carry on the Regulated Activities of Dealing in Investments; or

(b) a Recognised Non-AIFC Member; or

(c) Person intending to deal in Commodity Derivatives or Environmental Instruments who meets the criteria in GEN 1.1.14; or

(d)   a Person by providing that Person with access to the facility, on which Security Tokens are traded or cleared or both traded and cleared, in respect of their trading or clearing of Investment Tokens only.

(2) [intentionally omitted]

(3) An Authorised Market Institution must ensure that a Member who is a Person referred to in (1)(c), or a Person referred to in 1(d) whose access is only for trading or clearing of Commodity Derivative Tokens or Environmental Instrument Tokens, is a Professional Client and treat the Person as such.

For the purposes of this rule, Professional Client has the same meaning as defined in COB Chapter 2.

(4) Before admitting a Person referred to in (1)(c) as a Member, an Authorised Market Institution must undertake due diligence to ensure that such a Person:

(a) is of sufficient good repute;

(b) has a sufficient level of competence, experience and understanding of relevant Investments., Financial Services, transactions and any associated risks, including appropriate standards of  conduct for its staff permitted to use its order entry system; and

(c) has adequate organisational arrangements, including financial and technological resources, which are appropriate to allow it to discharge its obligations in respect of their category of membership at the Authorised Market Institution.

(5) An Authorised Market Institution must keep records of the procedures which it has followed under (3), including any documents that evidence the Person's assessment. The records must be kept for at least six years from the date on which the business relationship with a Person ended.

(6)      Before admitting a Person referred to in (1)(d), an Authorised Market Institution must undertake due diligence to ensure that the Person: 

(a) is of sufficient good repute;

(b) has a sufficient level of competence, experience and understanding of relevant Investments, Financial Services, transactions and any associated risks, including appropriate standards of conduct for its staff permitted to use its order entry system; 

(c) has adequate financial and technological resources to meet the Business Rules of the facility;

(d) does not pose any operational risks to the orderly and efficient functioning of the facility’s trading or clearing systems; and

(e) does not pose any money laundering or terrorist financing risks.

2.6.2. Admission criteria

An Authorised Market Institution must ensure that access to its facilities is subject to criteria designed to protect the orderly functioning of the market and the interests of investors.

2.6.3. Membership Rules

The Membership Rules of an Authorised Market Institution must specify the obligations imposed on users or Members of its facilities arising from:

• (a) the constitution and administration of the Authorised Market Institution;
• (b) where appropriate rules relating to transactions on its trading venues;
• (c) admission criteria for Members;
• (d) where appropriate rules and procedures for clearing and settlement of transactions; and
• (e) where appropriate rules and procedures for the prevention of Market Abuse, money laundering and Financial Crime in accordance with AMI 2.8.

2.6.4. Undertaking to comply with AIFC rules

An Authorised Market Institution may not admit as a Member a Person referred to in 2.6.1.(1)(b) or (c) unless the Person:

1. (a) agrees in writing to submit unconditionally to the jurisdiction of the AFSA in relation to any matters which arise out of or which relate to its use of the facilities of the Authorised Market Institution;
2. (b) agrees in writing to submit unconditionally to the jurisdiction of the AIFC Courts in relation to any disputes, or other proceedings in the AIFC, which arise out of or relate to its use of the facilities of the Authorised Market Institution;
3. (c) agrees in writing to subject itself to the AIFC laws in relation to its use of the facilities of the Authorised Market Institution; and
4. (d) where the Recognised Non-AIFC Member is incorporated outside the Republic of Kazakhstan, appoints and maintains at all times, an agent for service of process in the AIFC.

Guidance

1. (1)Service of process is the procedure by which a party to a lawsuit (Claimant) gives an appropriate notice of initial legal action (Claim Form) to another party (Defendant), in an effort to exercise jurisdiction over that Person so as to enable that Person to respond to the proceeding before the court. Notice is furnished by delivering a set of court documents (called "process") to the Person to be served. Service of a Claim Form is defined in clause 4.9 of the AIFC Court Rules. Acknowledgement of process and consequences of not filing an acknowledgment of service are defined in clause 7.4 of the AIFC Court Rules. Methods of service are defined in Part 5 of the AIFC Court Rules.
2. (2)An agent for service of process is a service provider having legal and real presence in the AIFC.
3. (3)The main role of agent for service of process is to receive service of process in the AIFC on behalf of a Person, acknowledge the service of process, and forward the process to such Person once it is received.

2.6.5. Lists of users or Members

The Authorised Market Institution must make arrangements regularly to provide the AFSA with a list of its Members. The requirements in AMI 2.6 do not apply to an Authorised Crowdfunding Platform

2.7.1. Direct Electronic Access

Direct Electronic Access means any arrangement, such as the use of the Member's trading code, through which a Member or the clients of that Member are able to transmit electronically orders relating to Securities, or Units in a Listed Fund, Commodity Derivatives, or Environmental Instruments directly to the facility provided by the Authorised Market Institution.

Guidance:

A Person who is permitted to have Direct Electronic Access to an Authorised Market Institution's facilities through a Member is not, by virtue of such permission, a Member of the Authorised Market Institution.

2.7.2. Direct electronic access – general conditions

An Authorised Market Institution may only permit a Member specified in AMI 2.6.1(1)(a) and (b) to provide its clients Direct Electronic Access to the Authorised Market Institution's facilities where the clients meet the suitability criteria established by the Member in order to meet the requirements in AMI 2.7.3

2.7.3. Direct electronic access – criteria, standards and arrangements

An Authorised Market Institution which permits its Members to have direct electronic access to its trading facilities or permits its Members to allow their clients to have Direct Electronic Access to its trading facilities must:

• (a) ensure that a Member allowing its clients to have direct electronic access to the trading facilities of an Authorised Market Institution is an Authorised Person;
• (b) set appropriate standards regarding risk controls and thresholds on trading through Direct Electronic Access;
• (c) be able to identify orders and trades made through Direct Electronic Access;
• (d) be able to distinguish and, if necessary, stop orders or trades made by a client using Direct Electronic Access provided by the Member without affecting the other orders or trades made or executed by that Member; and
• (e) have arrangements in place to suspend or terminate the provision of Direct Electronic Access in the case of non-compliance with this sub-paragraph.

2.7.4. Direct electronic access rules

An Authorised Market Institution operating a trading venue which permits Direct Electronic Access through it systems must set out and publish the rules and conditions pursuant to which its Members specified in AMI 2.6.1(1)(a) and (b) may provide Direct Electronic Access to their clients. Those rules and conditions must at least cover the specific requirements set out below:

• (a) A Member must retain responsibility for the orders and trades executed by the clients who are using Direct Electronic Access.
• (b) A Member must have adequate mechanisms to prevent the clients placing or executing orders using Direct Electronic Access in a manner that would result in the Member exceeding its position or margin limits.
• (c) A Member must conduct annually or on request from AFSA a due diligence assessment of its prospective Direct Electronic Access clients to ensure they meet the rules of the trading venue to which it offers access.
• (d) The due diligence assessment referred to in sub-paragraph (c) above must cover:
• (i) the governance and ownership structure of the prospective Direct Electronic Access client;
• (ii) the types of strategies to be undertaken by the prospective Direct Electronic Access client;
• (iii) the operational set-up, the systems, the pre-trade and post-trade controls and the real-time monitoring of the prospective Direct Electronic Access client;
• (iv) the responsibilities within the prospective Direct Electronic Access client for dealing with actions and errors;
• (v) the historical trading pattern and behaviour of the prospective Direct Electronic Access client;
• (vi) the level of expected trading and order volume of the prospective Direct Electronic Access client;
• (vii) the ability of the prospective Direct Electronic Access client to meet its financial obligations to the Direct Electronic Access provider; and
• (viii) the disciplinary history of the prospective Direct Electronic Access client, where available.
• (e) A Member offering Direct Electronic Access allowing clients to use third-party trading software for accessing trading venues must ensure that the software includes pre-trade controls.

The requirements in AMI 2.7 do not apply to an Authorised Crowdfunding Platform.

2.8.1. Financial Crime

Financial Crime means any kind of conduct relating to money or to financial services or markets that would amount to criminal conduct under law of Republic of Kazakhstan (whether or not such conduct takes place in the Republic of Kazakhstan), including any offence involving:

• (a) fraud or dishonesty;
• (b) misconduct in, or misuse of information relating to, a financial market;
• (c) handling the proceeds of crime; or
• (d) the financing of terrorism.

2.8.2. Measures to prevent, detect and report market abuse or Financial Crime

An Authorised Market Institution must:

• (a) ensure that appropriate measures (including the monitoring of transactions effected on or through the Authorised Market Institution’s facilities) are adopted to reduce the extent to which the Authorised Market Institution’s facilities can be used for a purpose connected with Market Abuse, Financial Crime or money laundering, and to facilitate their detection and monitor their incidence; and
• (b) immediately report to the AFSA any suspected Market Abuse, Financial Crime or money laundering, along with full details of that information in writing.

2.8.3. Whistleblowing

An Authorised Market Institution must have appropriate procedures and protections for requiring its Employees to disclose any information to the AFSA in a manner which does not expose them to any disadvantage as a result of so doing.

2.9.1. Safeguarding and administration of users’ assets

(1) An Authorised Market Institution must ensure that where its facilities include making provision for the safeguarding and administration of assets belonging to users of those facilities, including Members and other participants, satisfactory arrangements are made for that purpose with an appropriate custodian or settlement facility and clear terms are agreed between the users of the facility and the Authorised Market Institution.

(2) When assessing its systems and controls for the safeguarding and administration of assets belonging to users of its facilities, an Authorised Market Institution must have regard to the totality of the arrangements and processes by which it records:

(a) the assets held and the identity of the legal and beneficial owners of the relevant assets, and where appropriate, any Persons who have charges over, or other interests in, those assets; and

(b) any additions, reductions and transfers in each individual account of assets.

(3) When determining whether it has made satisfactory arrangements for the safeguarding and administration of assets belonging to the users of its facilities, an Authorised Market Institution should have regard to:

(a) the level of protection which the arrangements provide against the risk of theft or other types or causes of loss;

(b) whether the arrangements ensure that assets are only used or transferred in accordance with the instructions of the owner of those assets or in accordance with the terms of the agreement by which the Authorised Market Institution undertook to safeguard and administer those assets;

(c) whether the arrangements ensure that the assets are not transferred to the Authorised Market Institution or to any other Person to settle the debts of the owner (or other Person with the appropriate rights over the assets) except in accordance with valid instructions from a Person entitled to give those instructions, or in accordance with the terms of the agreement by which the Recognised Body undertook to safeguard and administer those assets;

(d) whether the arrangements include satisfactory procedures to ensure that any rights arising in relation to the assets held as a result of any actions by the issuers of those assets (or other relevant Persons) are held, transferred or acted upon in a timely and accurate manner in accordance with the instructions of the owner of those assets or in accordance with the terms of the agreement by which the Recognised Body undertook to safeguard and administer those assets;

(e) whether there are adequate arrangements to ensure the proper segregation of assets belonging to the Authorised Market Institution (or to Undertakings in the same Group) from those belonging to the users of its facilities for the safeguarding and administration of assets;

(f) whether its arrangements include satisfactory procedures for the selection, oversight and review of custodians or sub-custodians used to hold the assets;

(g) whether the agreements by which the Authorised Market Institution undertakes to safeguard and administer assets belonging to users of its facilities include appropriate information regarding the terms and conditions of that service and the obligations of the Authorised Market Institution to the user of the service and of the user of the service to the Authorised Market Institution;

(h) whether the records kept of those assets and the operation of the safeguarding services provide sufficient accurate and timely information to:

(i) identify the legal and beneficial owners of the assets and of any Persons who have charges over, or other interests in, the assets;

(ii) record separately any additions, reductions and transfers in each account of assets held for safeguarding or administration; and

(iii) identify separately the assets owned by (or, where appropriate, on behalf of) different Persons, including, where appropriate, the assets owned by Members of the Authorised Market Institution and their Clients;

(i) the frequency of reconciliation of the assets held by (or on behalf of) the Authorised Market Institution with the accounts held with the Authorised Market Institution by the users of its safeguarding and administration services and the extent of the arrangements for resolving a shortfall identified in any reconciliation; and

(j) the frequency with which statements of their holdings are provided to the users of the safeguarding and administration services, to the owners of the assets held and to other appropriate Persons in accordance with the terms of the agreement by which the Authorised Market Institution undertook to safeguard and administer those assets.

2.9.2. Custody and investment risk

(1)     An Authorised Market Institution must have effective means to address risks relating to:

1. (a)      custody of its own assets, in accordance with (2), if it is an Authorised Clearing House; or
2. (b)      investments, in accordance with (3), if it is an Authorised Investment Exchange.
3. (c)     [intentionally omitted]

(2)     For the purposes of (1)(a), an Authorised Clearing House must:

1. (a)      hold its own assets with entities which are licensed for holding deposits or providing custody, as judged appropriate by the AFSA or a Financial Services Regulator acceptable to the AFSA;
2. (b)      be able to have prompt access to its assets when required; and
3. (c)      regularly evaluate and understand its exposures to entities which hold its assets.

(3)     For the purposes of (1)(b), an Authorised Investment Exchange must ensure that:

1. (a)      it has an investment strategy which is consistent with its overall risk-management strategy and is fully disclosed to its Members and other participants using its facilities;
2. (b)      its investments comprise instruments with minimal credit, market, and liquidity risks; and
3. (c)      its investments are secured by, or represent claims on, high-quality obligors, allowing for quick liquidation with little, if any, adverse price effect.