SWEDEN Law and Practice Contributed by: Robert Karlsson, Helena Rönqvist, Caroline Landerfors and Vilma Slättegård, Magnusson Law
6.8 Market Integrity Principles Market abuse violations are regulated by the EU Mar - ket Abuse Regulation (MAR) and the Swedish Market Abuse Penalties Act. These Acts contain, among other things, prohibitions against insider dealing, market manipulation and unlawful disclosure of inside infor - mation. Furthermore, MAR contains requirements for public disclosure of inside information, as well as rules for insider lists and the reporting of managers’ trans - actions. MAR and the Market Abuse Penalties Act are supervised by the SFSA and the Swedish Economic Crime Authority ( Ekobrottsmyndigheten EBM). The Swedish Securities Council (the “Council”; Aktie marknadsnämnden ) has been instituted to promote good practice on the Swedish stock market and does so through rulings, advice and information. The Coun - cil is part of the self-regulation system on the stock market under The Association for Generally Accepted Principles in the Securities Market. When the Council interprets what constitutes good practice in a spe - cific matter, it often involves supplementing an exist - ing regulatory framework by assessing aspects that are not explicitly regulated already or issuing rulings on situations for which no regulation currently exists. 7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations All financial instruments, regardless of the asset class, are subject to the SMA, which contains the main Swedish rules relating to high-frequency and algo - rithmic trading. An investment firm that applies algorithmic trading must inform the SFSA. In addition, investment firms that engage in algorithmic trading must have effec - tive systems and risk controls that are adapted to the specific trading operation, and which are sufficient to ensure, inter alia, that the trading systems cannot be used for purposes contrary to the MAR or to the rules of any trading platform to which the company is affiliated. Algorithmic traders must also have effective business continuity arrangements in place to deal with disruptions to their trading systems and shall ensure
that those systems are fully tested and adequately monitored. Companies engaged in algorithmic trading must doc - ument the measures they have taken in accordance with the aforementioned systems and risk measure- ments so that the SFSA can monitor the company’s compliance with the SMA. Further requirements apply to investment firms that An investment firm that engages in algorithmic trad - ing as part of a market-making strategy is subject to certain rules in the SMA. Any such market maker must: • execute its market-maker strategy continuously during a fixed proportion of trading hours of the trading venue so that liquidity is provided to the trading venue in a regular and predictable manner; • enter into a written agreement with the operator of the trading platform, which includes the market maker’s obligations; and • implement effective systems and controls to ensure that the institution always fulfils its contrac - tual obligations with the platform operator. use algorithmic high-frequency trading. 7.2 Requirement To Be Licensed or Registered as a Market Maker When Functioning in a Principal Capacity Market makers are obligated to maintain accurate and chronological records of all their placed or executed orders, and of prices quoted on trading venues. The company shall make these records available to the SFSA upon request. Furthermore, market makers must publish information on the quality of their execution of transactions. The information shall be published at least once a year and shall be made available free of charge. 7.3 Regulatory Distinction Between Funds and Dealers The rules regarding algorithmic trading, high-frequen - cy trading and market making set out in the SMA apply to investment firms.
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