CAYMAN ISLANDS Law and Practice Contributed by: Jason Ta, Gemma Walters, Paul Walters and Ben Magahy, Travers Thorp Alberga
In addition, peer-to-peer trading platforms can impact fintech participants in various ways, such as through: • increased competition – peer-to-peer platforms could compete directly with existing fintech solu - tions for trading and financial services; and • collaboration opportunities – fintech players could integrate with peer-to-peer platforms or offer complementary services, like asset management or education. Regulatory challenges can include: • AML/CTF compliance – ensuring peer-to-peer plat - forms comply (to the extent applicable) with AML/ CTF regulations is difficult due to the decentralised nature of transactions; • consumer protection – protecting users from fraud, scams and market manipulation in a peer-to-peer environment poses challenges; • financial stability – peer-to-peer platforms could potentially impact financial stability if large-scale transactions occur outside regulated systems; • data privacy concerns – integrating with P2P platforms might raise data privacy issues that need careful handling; and • effective regulation might require international co-operation due to the borderless nature of P2P platforms. 6.7 Rules of Payment for Order Flow There are no specific rules relating to payment for order flow. The default is to the rules discussed in 6.5 Order Handling Rules . 6.8 Market Integrity Principles CIMA has imposed market integrity standards under the Rule – Obligations for the Provision of Virtual Asset Services – Virtual Asset Custodians and Virtual Asset Trading Platforms (December 2024). These standards go to the prevention of insider dealing, market manip - ulation and unfair trading practices. As it stands, SIBA has two main focuses when it comes to upholding market integrity principles: pre - venting the creation of a false or misleading market and preventing insider trading. Committing either of these is an offence under SIBA. SIBA will be relevant
where virtual assets represent or can be converted into one of the securities listed in the schedule to SIBA. 7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations The creation of high-frequency and algorithmic trad - ing strategies is not itself regulated – but the man - ner in which they are used could be regulated. As an example, a proprietary trader that has created and deploys their own high-frequency or algorithmic trad - ing strategy will not be regulated – however if that same strategy is deployed by an investment fund it will be regulated – as a result of being an investment fund – rather than as a result of the investment fund deploy - ing a high-frequency or algorithmic trading strategy. A crypto market maker operating in a principal capac - ity will generally be outside the scope of the VASP Act. 7.3 Regulatory Distinction Between Funds and Dealers Investment funds will generally be regulated pursu - ant to the Mutual Funds Act or the Private Funds Act, whereas dealers are generally regulated under SIBA. The Cayman Islands regulatory regime does not regard investment funds as market makers. 7.4 Regulation of Programmers and Programming Generally speaking, programmers who develop and create trading algorithms and other electronic trading tools will not be regulated – see for example 7.1 Crea- tion and Usage Regulations . The manner in which the trading algorithms and other electronic trading tools are deployed will determine whether the activity is regulated – see again for example 7.1 Creation and Usage Regulations . 7.2 Requirement To Be Licensed or Registered as a Market Maker When Functioning in a Principal Capacity
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