Supervision of entities in securities market
The Central Bank of Iceland monitors entities in the securities market, such as market operators (stock exchanges) and central securities depositories. The activities of these entities are i.a. intended to ensure that trading in the securities market proceeds swiftly and safely, as well as to ensure the registration of ownership rights. These entities are important and it is therefore necessary to ensure their supervision is strong and effective. Supervision of the securities markets also includes supervision of the securities activities of financial undertakings, which provide various services to clients on the securities market, and the execution of transactions.
Regulated market
Operation of a regulated market is limited to entities authorised as market operators, but in Iceland one such market is operated by Nasdaq Iceland.In addition, market operators and investment firms may operate a Multilateral Trading Facility (MTF) and an Organised Trading Facility (OTF).Together, regulated markets, MTFs and OTFs fall under the term of a trading venue, but the operation of a trading venue is i.a. governed by Act No. 115/2021 on the Market for Financial Instruments.
Multilateral trading facility (MTF)
In Iceland, one MTF is operated by Nasdaq Iceland, but the First North Iceland trading facility has been listed as a growth market for small and medium-sized enterprises. In general, the requirements for issuers in an MTF are fewer than in the regulated market. The listing of such markets as growth markets for small and medium-sized enterprises calls for an even further easing of the requirements placed on issuers and is intended to facilitate listings for smaller issuers. In addition to the traditional supervision of Nasdaq Iceland, the Central Bank of Iceland is a member of a Nordic supervisory group for the activities of stock exchanges operated by Nasdaq in the Nordic countries.
Central securities depositories
The operations of central securities depositories are governed by Act no. 7/2020 on Central Securities Depositories and Settlement and the Electronic Registration of Financial Instruments. The Act stipulates, among other things, who has the right to act as an intermediary for registrations in central securities depositories, listing activities, the settlement of securities and the legal effects of listings, etc.
Central securities depositories in Iceland
Two central securities depositories operate in Iceland:
- The Verðbréfamiðstöð Íslands (VBM) central securities depository, which operates under the supervision of the Central Bank
- The Nasdaq CSD Iceland is the Icelandic branch of the Nasdaq CSD SE group. Operates under the joint supervision of Bank of Latvia and the Central Bank.
Supervision of trading in the securities market
The Central Bank of Iceland monitors trading in the securities market through, among other things, the use of a surveillance system. The system automatically processes data sent by regulated entities to the Central Bank for the monitoring of trading and orders.
Reporting of suspicious transactions
There are also obligations placed on regulated entities that provide financial services and entities in the securities market to monitor market behaviour and notify the Central Bank if there is a suspicion of abnormal behaviour or trading.
Cooperation with the Iceland Stock Exchange
The Central Bank and Nasdaq Iceland work closely together on the supervision of the market. The Stock Exchange is under extensive legal obligations to supervise the markets it operates, e.g. to monitor market abuse (insider trading and market abuse) and the disclosure obligations of issuers, and the Stock Exchange operates an electronic surveillance system of trading, which is designed to ensure normal price formation on the market and that market participants operate in accordance with laws and regulations.