CHILE Law and Practice Contributed by: Alberto Alcalde, María Catalina Zegers García-Huidobro and Pía Robledo, Puga Ortiz
7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations The law does not establish a specific regime for algo - rithmic trading but applies general principles on trans - parency, governance and risk management. Entities using algorithms must ensure system reliabil - ity, objectivity and consistency, and implement ade - quate governance, risk and cybersecurity controls. The CMF may require certification of such systems. Entities must disclose key parameters and method - ologies, as well as conflicts of interest, particularly in advisory services. Algorithmic systems must not engage in market abuse. The CMF supervises compliance and may tailor requirements depending on the nature of the service or asset class. In Chile, entities functioning in a principal capacity as market makers are required to be licensed or regis - tered to operate professionally. The law establishes a registration and authorisation regime for entities providing financial services, including those acting as intermediaries or market makers. Entities providing services such as intermediation of financial instruments must be registered in the Reg - istry of Financial Service Providers managed by the CMF. Only entities registered in this registry can oper - ate professionally in these capacities. To be registered and authorised, entities functioning as market makers must meet the following conditions: • exclusive business purpose; • operational and risk management capacity; • guarantees and minimum capital; • governance and risk management; and • transparency and disclosure. Certain entities, such as banks and securities interme - diaries, may operate as market makers without being 7.2 Requirement To Be Licensed or Registered as a Market Maker When Functioning in a Principal Capacity
Fintechs benefit from the rise of P2P platforms by leveraging technology to create innovative solutions, such as blockchain-based trading or automated sys - tems. Market Expansion P2P platforms enable fintechs to reach underserved markets, promoting financial inclusion. P2P platforms must comply with the Fintech Law, which regulates services like crowdfunding platforms and alternative trading systems. Ensuring compliance with AML and CTF regulations is critical, as P2P platforms may be vulnerable to misuse. P2P platforms handle sensitive financial data, requir - ing adherence to strict data protection standards. 6.7 Rules of Payment for Order Flow The law does not expressly regulate payment for order flow (PFOF), but its general principles on transpar - ency, conflicts of interest and best execution apply. Entities providing order routing or intermediation ser - vices must disclose conflicts of interest, ensure fair and efficient execution, and provide clear information on order routing arrangements. PFOF structures may raise concerns under these principles, particularly regarding impartiality, market integrity and quality of execution, and are therefore subject to regulatory scrutiny. 6.8 Market Integrity Principles The framework establishes principles to ensure mar - ket integrity, including transparency, fairness, best execution and technological neutrality. Entities must provide clear and timely information, ensure equitable access and trading conditions, prioritise best execu - tion, and disclose and manage conflicts of interest. Market abuse is prohibited, including price manipu - lation, fictitious transactions, misleading information and unauthorised use of client assets. Breaches may result in administrative and criminal sanctions. The CMF supervises compliance and may impose sanc - tions, including fines and revocation of authorisations.
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