The specialist lawyer Lutz Auffenberg and his law firm Fin Law have specialized in the field of fintech and innovative technologies. In particular, blockchain technology and its regulation are at the center of his work. In his guest post, he addresses the question of whether a listing on the stock exchange can be an alternative to a BaFin license.
This article first appeared on the Fin Law blog.
In Germany, the operation of exchange platforms for classical financial instruments, as well as for cryptographic securities, has always been subject to authorization. If trading on the exchange platform is carried out through the automatic merger and processing of buy and sell orders, there is generally a multilateral trading system, the operation of which requires approval as a securities trading company in accordance with the Law. of Securities Institutes (WpIG). Regulatory requirements for operators of multilateral trading systems are high and both the granting of the necessary permits and ongoing supervision to ensure compliance with all regulatory obligations are carried out by BaFin and the Deutsche Bundesbank. In contrast, stock exchange operators under the German Stock Exchange Act are not considered investment firms. The processing of permit applications and permanent supervision is not carried out by the BaFin and the Bundesbank, but by the body that has been declared responsible in the respective federal state, which is usually the State Ministry of the Economy. For the crypto industry, the question arises in this context whether the application for admission to the stock exchange allows the operation of a crypto exchange.
Assets that can be traded on exchanges are stipulated by law. According to the Stock Exchange Law, there may be stock exchanges and commodity exchanges. While only goods such as metals, minerals, agricultural products, electricity, or other fungible assets or futures transactions related to these objects can be traded on commodity exchanges, all types of securities, such as stocks and debt securities, can be traded as well. as related derivatives. stock exchanges. However, classical cryptocurrencies such as Bitcoin or Ether are not securities or goods in the required sense and therefore cannot be traded on stock exchanges within the meaning of the Stock Exchange Law. However, this does not apply to security tokens, which are values in token form. Therefore, tokenized bonds and stocks or tokenized derivatives could also be traded on stock exchanges, provided that the exchange operator provides the technical requirements for trading.
Stock exchanges under the Stock Exchange Law must be public law institutions with partial legal capacity to which the administrative regulations of the German Stock Exchange Law apply. Stock exchanges are operated by brokerage companies, which can be privately organized companies. To operate an exchange, exchange operators need a permit from the responsible state authority. In particular, proof of sufficient financial resources is required to obtain a permit, the specific amount of which depends on the scope of the planned business. In addition, the stock trader must develop a viable business plan and have professionally appropriate and trustworthy trustees and shareholders. It should also be ensured that the operator of the exchange is technically capable of operating the exchange and has an adequate risk management system. There is also a need for stock exchange regulations that meet the requirements stipulated by the Stock Exchange Law. In addition, the Stock Market Law contains a number of additional specific obligations for stock exchange operators, such as the establishment of a commercial oversight office and a stock exchange council. In structuring rates and charges, exchange operators are not free in any way. The fee schedule must be approved by the supervisory authority of the stock exchange. In general, the operation of a stock exchange in accordance with the Stock Market Law is no less complex from a regulatory point of view than the operation of a multilateral trading system.