GUERNSEY Law and Practice Contributed by: Matthew Brehaut and Tom Carey, Carey Olsen
7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations There is no specific regulation that exists for high-frequency and algorithmic trading plat - forms in Guernsey. 7.2 Requirement to Be Licensed or Otherwise Register as Market Makers When Functioning in a Principal Capacity Guernsey has no specific legislation covering market makers functioning in a principal capac - ity. 7.3 Regulatory Distinction Between Funds and Dealers In Guernsey, regulations make a distinction between funds that engage in high-frequency and algorithmic trading and dealers engaged in these activities. If a collective investment scheme (a fund) is carrying on the activities in 7.2 Requirement to Be Licensed or Otherwise Register as Market Makers When Function- ing in a Principal Capacity , the scheme is not required to obtain a separate regulatory licence, as long as such activities are provided for and on behalf of the scheme. However, if a dealer is engaged in such activities then the dealer may require a licence under the POI Law. 7.4 Regulation of Programmers and Programming Programmers who develop and create trading algorithms and other electronic trading tools are not themselves regulated.
6.8 Market Integrity Principles Guernsey has various primary and secondary legislation covering such activities. The CoB Rules, which apply to persons licensed under the POI Law, are described in 3.3 Issues Relating to Best Execution of Customer Trades and 6.5 Order Handling Rules . These incorpo - rate the Principles of Conduct of Finance Busi - ness (ten fundamental principles applicable to licences, including integrity, skill, care and dili - gence, conflicts of interest, and open and co- operative dealings with the GFSC). The Company Securities (Insider Dealing) (Baili - wick of Guernsey) Law 1996 and the Financial Services Business (Enforcement Powers) (Baili - wick of Guernsey) Law 2020, as well as the Code of Market Conduct (issued thereunder), set out restrictions on behaviour amounting to insider dealing and market abuse. Broadly speaking, market abuse is: • behaviour based on information that is not generally available to those using the mar - ket but which, if available to a regular user of the market, would (or would be likely to) be regarded by that regular user as relevant when deciding the terms on which transac - tions in investments of the kind in question should be effected; • behaviour likely to give a regular user of the market a false or misleading impression as to the supply of (or demand for) or the price or value of investments of the kind in question; and • behaviour that a regular user of the market would (or would be likely to) regard as behav - iour that would (or would be likely to) distort the market in investments of the kind in ques - tion.
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