BAHAMAS Law and Practice Contributed by: Dwayne Whylly, Kamala Richardson-Deal and Nastassia Rigby-Rodriguez, Glinton Sweeting O’Brien
exchange is required to submit its rules for clearing and settlement to the Securities Commission. 6.6 Rise of Peer-to-Peer Trading Platforms The rise of P2P trading platforms has expanded the ways in which digital assets may be bought and sold, reducing reliance on traditional intermediaries such as exchanges, broker-dealers, and financial institutions. This has increased competition for both traditional financial firms and fintech providers, as users can transact directly through distributed ledger technol - ogy without using centralised trading platforms. How - ever, the DARE Act 2024 takes a functional approach, requiring registration whenever a person operates or facilitates a marketplace, matching service, or plat - form for trading digital assets, that activity may con - stitute a digital asset business. The regulation of trading platforms creates regulatory challenges because many P2P systems are decen - tralised and may not have a clearly identifiable oper - ator that can be licensed or supervised. The DARE Act 2024 addresses this by applying to persons who organise, promote, operate, or facilitate the issuance, sale, transfer, or exchange of digital assets in or from within The Bahamas, even if the activity occurs online or across borders. As a result, DABs developing P2P platforms may still fall within the regulatory purview of the DARE Act 2024, particularly where they provide custody, matching, order execution, or other interme - diary functions. The growth of P2P trading also raises concerns about AML/CFT/CPF compliance, investor protection, mar - ket manipulation, and transparency, since trades may occur outside regulated exchanges. The DARE Act 2024 imposes obligations on registered digital asset businesses to maintain proper controls, monitoring systems, and disclosure standards, and gives the Securities Commission broad powers to supervise and take enforcement action where trading activity threatens market integrity or the public interest. 6.7 Rules of Payment for Order Flow There are no express provisions in the DARE Act 2024 specifically relating to payment for order flow. A DAB, including an exchange or intermediary executing orders, must maintain proper systems and controls,
act honestly and fairly, and ensure that it does not mislead clients or undermine market integrity. These obligations require DABs to disclose conflicts of inter - est and to maintain rules that promote fair and orderly trading, which would likely restrict undisclosed pay - ment-for-order-flow arrangements. In addition, exchanges must keep records of transac - tions, provide accurate pricing and trading information, and implement market surveillance tools designed to detect abusive or manipulative practices. If payment for order flow were to create incentives that distort execution quality, price discovery, or client outcomes, the Securities Commission could treat the practice as inconsistent with the DARE Act 2024’s requirements relating to investor protection, professional conduct, and market fairness. The Securities Commission also has broad supervi - sory powers to impose conditions, require changes to business practices, or suspend activities that are conducted in a manner that is misleading or injurious to the public. Accordingly, while not expressly pro - hibited, payment for order flow would likely only be permissible in The Bahamas if fully disclosed, prop - erly controlled, and consistent with duties imposed by the DARE Act 2024 relating to conflicts management, transparency, and fair market operation. 6.8 Market Integrity Principles The DARE Act 2024 contains a number of provisions, the aim of which is ensuring market integrity and deterring market abuse. These provisions include: • management of conflicts of interests (Section 31); • a prohibition on insider dealing (Section 69); • a prohibition on disclosure of insider information (Section 70); • a prohibition on market manipulation (Section 71); and • protection for whistle-blowers (Section 73). Conflicts of Interests Pursuant to Section 31, DARE Act 2024 registrants are required to take all reasonable steps to identity and avoid conflicts of interests and where they cannot be avoided, take all reasonable steps to manage, mini - mise and monitor conflicts of interests. In addition,
69 CHAMBERS.COM
Powered by FlippingBook