UNITED ARAB EMIRATES Law and Practice Contributed by: Arnold Krutilins and Gabrielle Margerison (nee Lowe), White & Case LLP
exchanges which operate in a highly regulated envi - ronment. As in other jurisdictions, the lack of regula - tion also raises concerns with respect to AML/CTF and adequate KYC. This is a particularly pertinent point, given the regulatory authorities’ active enforce - ment appetite in this space on account of the UAE’s addition to the FATF grey list on 4 March 2022 and its subsequent removal from the FATF grey list in Febru - ary 2024. During its review of the UAE, the FATF cited the pro - gress made by the UAE in strengthening the effec - tiveness of its AML/CTF regime including by applying effective and proportionate sanctions for AML/CTF non-compliance involving financial institutions and designated non-financial businesses and professions and increasing suspicious transaction report filings for those sectors and increasing investigations and prosecution of money laundering. 6.7 Rules of Payment for Order Flow Payment for order flow is a compensation model under which a broker is paid a small commission for routing client trade orders to a particular market maker. A market maker matches buy and sell orders to execute a trade. The CMA Rulebook provides that in executing trade orders, a broker must refrain from using the trading data, transactions and orders of its clients to achieve special benefits or gains. This indi - cates that the permissibility of payment for order flows With respect to “onshore UAE”, the Capital Markets Law sets out specific provisions in respect of disclo - sure and transparency which must be adhered to. In the ADGM, there is a prohibition on market abuse, which includes insider trading, dealing or disclos - ing inside information, and effecting transactions or orders to trade which employ fictitious devices or any other form of deception or contrivance or the dissemi - nation of information which is likely to create a false or misleading impression, amongst other things. This is supplemented by the FSRA’s Code of Market Con - duct, which is intended to prevent market abuse by providing further clarity about what activities the FSRA might regard as constituting market abuse. in “onshore UAE” will be limited. 6.8 Market Integrity Principles
The DIFC’s Markets Law 2012 sets out a prohibition on various forms of market abuse, including: • fraud and market manipulation; • making false and misleading statements, conduct and distortion; • deception and use of fictitious devices; • insider dealing; The provisions on market abuse set out in the Markets Law 2012 are supplemented by the DFSA’s Code of Market Conduct, which also elaborates on the con - duct, which may fall into these categories of market abuse. Finally, the VARA has issued its Market Conduct Rulebook pursuant to the Virtual Assets and Relat - ed Activities Regulations 2023. The Market Conduct Rulebook sets out provisions in respect of disclosure and transparency and requires VASPs to adhere to Virtual Asset Standards in providing and/or offering virtual asset activities. • providing insider information; • inducing persons to deal; and • misuse of information. 7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations A separate regulatory regime for high-frequency and algorithmic trading does not appear to be provided for under the UAE’s financial services regulatory frame - works. This trading would be regulated generally as discussed in 6 Marketplaces, Exchanges and Trad- ing Platforms .
7.2 Requirement To Be Licensed or Registered as a Market Maker When Functioning in a Principal Capacity
There does not appear to be a requirement for prin - cipals to register as market makers under applicable UAE regulatory regimes.
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