POLAND Law and Practice Contributed by: Wojciech Ługowski, Lawarton Lugowski Kapica Spolka Komandytowa
The regulation ensures fair competition, investor pro - tection and market stability. KNF actively supervises trading and issues public warnings about suspected market abuse. 7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations High-frequency trading (HFT) and algorithmic trad - ing are regulated under MiFID II regulations, requiring firms to register with KNF and meet market-making obligations for transparent trading. Firms must implement risk controls, trading thresholds and continuity plans to ensure compliance. Trading venues must provide fair access and monitor market abuses linked to HFT strategies. Regulations apply across equities, bonds and deriva - tives, although risk controls vary by market structure and liquidity, with bond markets requiring different safeguards than equities. Under the Act on Trading in Financial Instruments, investment firms acting as market makers must obtain a broker’s licence from KNF. Their role is to provide continuous liquidity by regularly offering buy and sell prices at competitive levels on one or more trading venues. Market makers must comply with best execution prin - ciples, risk management requirements and transpar - ency obligations. They are also subject to transaction reporting and state supervision to prevent market manipulation. Failure to meet market-making obliga - tions can result in regulatory sanctions, including fines or loss of licence. 7.3 Regulatory Distinction Between Funds and Dealers Under MiFID II regulations, algorithmic trading regula - tions apply uniformly to investment firms, regardless of whether they are dealers or investment funds. Both 7.2 Requirement To Be Licensed or Registered as a Market Maker When Functioning in a Principal Capacity
must implement risk controls to prevent disorderly trading. However, dealers and funds may operate under differ - ent regimes. Dealers trade on their own account, often as market makers, and usually require an investment firm licence. Investment funds manage client assets under Undertakings for Collective Investment in Trans - ferable Securities (UCITS) or the Alternative Invest - ment Fund Managers Directive (AIFMD), focusing on portfolio management rather than liquidity provision. Despite structural differences, regulations focus on trading activities rather than entity type, ensuring mar - ket integrity across both models. 7.4 Regulation of Programmers and Programming Regulations focus on firms developing trading algo - rithms, and not individual programmers. However, investment firms, particularly those engaged in HFT and algorithmic trading, must ensure compliance with MiFID II regulations and DORA, even when outsourc - ing software development. Firms remain liable for the risk controls, security and compliance of their trading systems. While not direct - ly regulated, programmers may face scrutiny if their algorithms facilitate market manipulation or system failures. Additionally, firms must assess service pro - viders’ reliability and ensure adherence to regulatory and cybersecurity standards. Insurtech companies mostly follow the same regula - tions as traditional insurers, operating under the Insur - ance and Reinsurance Activity Act and KNF supervi - sion, with Solvency II ensuring capital adequacy and risk management. Insurers must act in the customer’s best interest, com - ply with pre-contractual and contractual obligations, and maintain transparent underwriting standards. Online underwriting for consumer insurance requires 8. Insurtech 8.1 Underwriting Processes
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