SERBIA Law and Practice Contributed by: Željka Motika, Ivana Bulatović and Jovana Spasojević Gligorijević, Motika i partneri
tify and avoid conflicts of interest and to comply with all applicable anti-money laundering requirements.
Such contracts typically define the market maker’s obligations regarding the provision of liquidity, the quoting of competitive prices, and the maintenance of market presence. They also outline any rebates or incentives offered by the trading venue in exchange for the market maker assuming the risk associated with maintaining liquidity. 7.3 Regulatory Distinction Between Funds and Dealers Regulations in the Republic of Serbia clearly distin - guish between dealers and investment funds. Dealers trade financial instruments on their own account, using their own capital, and are generally not required to be licensed or subject to the full inves - tor protection regime. However, they must obtain a licence from the Securities and Exchange Commis - sion when they act as market makers, hold the status of a member or participant of a regulated market or MTF, use direct electronic access to a trading venue, engage in high‑frequency or algorithmic trading (HFT/ AT), or trade on their own account while executing client orders. Investment funds are collective investment vehicles regulated under the Law on Open‑Ended Investment Funds with Public Offering and the Law on Alterna - tive Investment Funds. Their assets are managed by a management company, which is required to act in the best interests of investors. With a special licence from the Securities and Exchange Commission, manage - ment companies may also provide additional services – such as portfolio management or investment advice – to clients outside the fund. When offering these ser - vices, they must comply with the Capital Markets Act, including rules on conflicts of interest. Furthermore, if they use algorithmic trading, they are subject to the same regulatory standards as other investment firms. 7.4 Regulation of Programmers and Programming Developers are not directly subject to regulation. Their work is evaluated in the context of the responsibilities of the entities that employ these tools, the technical and organisational standards that the tools must com - ply with, and the application of general provisions on market abuse and criminal liability.
7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations The development and use of high‑frequency trading (HFT) and algorithmic trading (AT) are regulated under the Capital Markets Act, which permits the applica - tion of these technologies exclusively in the trading of financial instruments. Investment firms may engage in AT and HFT, provid - ed they submit prior notification to the Securities and Exchange Commission. Additionally, persons trading on their own account (dealers) who would otherwise not require a licence must obtain an investment firm licence if they engage in HFT. The use of AT/HFT requires compliance with strict organisational, technical, and staffing standards, as well as broader regulatory obligations. These include implementing robust risk‑management arrangements, pre‑ and post‑trade controls, real‑time monitoring, algorithm testing procedures, an emergency system shut‑down (“kill switch”), and precise time‑synchro - nisation mechanisms. In general, investment participants who trade finan - cial instruments on their own account (in a principal capacity) are exempt from the requirement to obtain a licence. However, when they act as market makers, they must be licensed by the Securities and Exchange Commission as investment firms. In this context, mar - ket makers are required to meet certain statutory con - ditions, including capital requirements, the employ - ment of appropriately licensed personnel, and the appointment of board members who possess a good professional reputation and relevant experience. Market makers do not operate independently but rath - er within a stock exchange or other trading venue, pursuant to a contract with the trading venue operator. 7.2 Requirement To Be Licensed or Registered as a Market Maker When Functioning in a Principal Capacity
713 CHAMBERS.COM
Powered by FlippingBook