CYPRUS Law and Practice Contributed by: Angelina Fitoz, Svetlana Remezova, Darya Averyanova and Sude Dogan, Lawitt Buro
Formal Prohibition Law 183 (I)/2025 implemented the EU-wide ban in Cyprus. Firms may not receive benefits for rout - ing retail orders, except transparent rebates passed directly to clients. Regulatory Rationale CySEC and the Central Bank treat PFOF as a structur - al conflict of interest. Firms must strengthen execution monitoring and disclose material changes to clients. Market Impact Zero-commission models funded by routing incen - tives have largely shifted to explicit fees or subscrip - tions, with higher compliance oversight costs. 6.8 Market Integrity Principles Market integrity in Cyprus is governed by the Market Abuse Regulation for financial instruments and equiv - alent rules under MiCA for crypto-assets. Core Prohibitions Across all markets, insider dealing, unlawful disclo - sure of inside information and market manipulation are prohibited. Extension to Crypto Since 2025, MiCA applies market abuse rules to crypto-assets admitted to trading, aligning crypto platforms with securities standards. Compliance and Enforcement CIFs and CASPs must operate surveillance systems and report suspicious activity. Issuers must meet disclosure and insider list requirements. CySEC may impose significant fines, and serious cases can lead to criminal liability. 7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations Algorithmic and high-frequency trading in Cyprus are regulated under MiFID II (for financial instruments) and MiCA (for crypto-assets), with emphasis on risk con - trols and market integrity rather than the technology itself.
Algorithmic Trading (MiFID II) CIFs using automated trading systems must notify CySEC and implement pre-trade controls, testing and continuous monitoring. Under DORA, such sys - tems also fall within ICT risk, resilience and incident- reporting frameworks. High-Frequency Trading HFT is treated as higher risk and requires circuit breakers, kill-switch mechanisms and detailed time- stamped records to prevent market disruption. Asset-Based Distinction MiFID II governs financial instruments (including security tokens), while MiCA imposes parallel surveil - lance standards for crypto-assets, though prudential requirements differ. In Cyprus, firms trading as principal (dealing on own account or acting as counterparty) must be properly authorised. Investment Firms (MiFID II) Firms dealing on own account must be licensed as Cyprus Investment Firms and comply with IFR/IFD capital rules, together with enhanced risk manage - ment and conflict controls. Crypto Context (MiCA) CASPs trading on own account require specific MiCA authorisation. While capital thresholds differ, govern - ance and conduct standards remain substantial. Limited Exemption A narrow exemption applies to pure proprietary traders with no third-party services, but not to mar - ket makers, HFT firms or entities with direct market access. In practice, most professional actors require authorisation. 7.3 Regulatory Distinction Between Funds and Dealers 7.2 Requirement To Be Licensed or Registered as a Market Maker When Functioning in a Principal Capacity In Cyprus, investment funds and dealers may use similar trading technology, but their regulatory treat - ment differs.
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