INDIA Law and Practice Contributed by: Shilpa Mankar Ahluwalia, Purva Anand and Ansh Jain, Shardul Amarchand Mangaldas & Co
tual Digital Assets (the “FIU-Ind Guidelines”), which came into effect from 10 March 2023. Every VASP
of credit to interested borrowers from non-traditional lenders such as small digital lending platforms and lending start-ups. 6.7 Rules of Payment for Order Flow SEBI prescribes procedural rules for processing pay - ments for trades in listed securities. For example, in 2018, SEBI introduced the electronic book process (EBP) for private placement of listed debt securi - ties. Under the EBP, subscription monies in respect of debt securities must be routed through an escrow account or the bank account of Clearing Corporation of India Limited, and should be credited to the issuer’s account upon allotment of the debt securities. 6.8 Market Integrity Principles Trading in securities in India is regulated and governed primarily by SEBI through policy moves for market surveillance and risk mitigation measures at the stock exchanges. The market surveillance systems of SEBI also oversee whether appropriate systems and safe - guards have been adopted by stock exchanges to check market movements and flag any issues (for example, timely reviews of the margining system). 7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations By way of a circular dated 3 April 2008, SEBI intro - duced the concept of Direct Market Access (DMA) and provided a legal framework for regulating such access to the DMA framework. SEBI permitted institutional investors to use DMA through SEBI-registered investment managers. In respect of algorithmic trading, SEBI issued the Broad Guidelines on Algorithmic Trading and subsequently issued additional guidelines pertaining thereto. Addi - tionally, SEBI issued the Measures to Strengthen Algorithmic Trading and Co-location/Proximity Host - ing Framework, which discussed the framework around managed co-locations, measurement of latency for co-location and proximity hosting and the free-of-charge tick-by-tick data feed (TBT Feed), order-to-trade ratio (OTR) penalties, unique identifiers
operating in India needs to: • register with the FIU-Ind;
• adopt the prescribed KYC verification processes to verify the identity of users at the time of onboard- ing; and • comply with PMLA requirements (for example, maintaining transaction records, reporting of suspi - cious transactions and specified transactions to the FIU-Ind). In the past, the FIU-Ind has served show cause notic - es to several crypto-exchanges for failing to register, and directed the GOI to block their URLs. Additionally, advertisements dealing with cryptocur - rency and/or virtual assets must contain adequate risk disclaimers and must not equate such products with regulated products – in accordance with the code issued by the Advertising Standards Council of India. 6.4 Listing Standards Listing standards and disclosure requirements are gov - erned by SEBI and registered stock exchanges. SEBI regulations on listing are fairly comprehensive and have separate requirements for public issues and private placements. In addition, the regulations also prescribe continuous disclosure requirements in connection with listed securities, based on materiality of events and their impact on the performance of the listed securities. 6.5 Order Handling Rules Placement of orders and settlement of funds for trades completed on the stock exchange are governed by applicable procedural rules which stipulate settle - ment cycle, timelines for placement of orders and completion of trades, etc. Given that listed securities are mandated to be in dematerialised form, transac - tions are undertaken through dematerialised accounts through registered brokers or agents. 6.6 Rise of Peer-to-Peer Trading Platforms See 2.1 Predominant Business Models . As far as digital lending is concerned, currently there are about 30 P2P lending platforms authorised by the RBI in India. P2P lending platforms have simplified delivery
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