BERMUDA Law and Practice Contributed by: Steven Rees Davies, Kyle Masters, Charissa Ball and Alexandra Fox, Carey Olsen
by the BMA upon the entity’s initial application for licensing or as part of a notification or appli - cation to introduce new listings. The BMA has also issued the Digital Asset Business Act 2018 – Product Due Diligence Guidance Notes, which outlines the BMA’s expectation in relation to the diligence conducted on products and services (including digital assets listed on a Bermuda exchange) introduced by a DABA licensee.
publications – all of which include principles governing the conduct of digital asset business generally and which supplement the principles and regulations found within the primary legisla - tion. Under these codes and rules, DABA licensed entities are required to observe principles such as ethical corporate behaviour, customer protection and security, business integrity and prudence, and regulatory and legal compliance. Within the relevant rules and codes, as well as the DABA, the BMA is granted authority to review, monitor and enforce the relevant requirements. 7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations Currently, there are no specific regulations exclu - sively for the creation and use of digital assets in high-frequency and algorithmic trading. Such activities may fall under either the DABA and/or IBA licensing regimes, depending upon the type of asset being traded and whether such activity falls within proprietary trading or operating as a business to the public. 7.2 Requirement to Be Licensed or Otherwise Register as Market Makers When Functioning in a Principal Capacity The DABA specifically includes market mak - ing activities within the scope of “digital asset service vendors” . A licence is required for such operations from or within Bermuda. Within the DABA’s framework, a market maker is defined as someone who – as part of their business – engages in trading digital assets by providing bid-and-ask prices to profit from spreads, fulfill - ing customer orders, or hedging positions result - ing from these activities.
6.5 Order Handling Rules See 6.4 Listing Standards . 6.6 Rise of Peer-to-Peer Trading Platforms
Peer-to-peer trading platforms that offer ser - vices to the public as a business in and from within Bermuda and allow the trading of digital assets are generally captured under the DABA and subject to the same regulatory requirements and scrutiny as operators of a digital asset exchange or digital asset derivative exchange. There is still open discussion and consideration as to how a DAO would be treated if providing such services; however, for the time being and in most instances, there would need to be a legal person or organisation with a nexus to Bermuda in order for the DAO to be captured. 6.7 Rules of Payment for Order Flow See 6.4 Listing Standards . 6.8 Market Integrity Principles The BSX has a clear set of principles concern - ing the market integrity expected of a traditional securities exchange within its Listing Regula - tions. The BMA has published the DAB Code of Practice, the DAB Client Disclosure Rules, the Cybersecurity Rules and AML Sector-Specific Guidance Notes for Digital Assets, among other
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