INDONESIA Law and Practice Contributed by: Emir Nurmansyah, Monic N. Devina, D. Meitiara P. Bakrie and Ruth A. Mendrofa, ABNR Counsellors at Law
This practice is also acknowledged by both the OJK and the IDX. The OJK, under its digital finance innovation rule, recognises the use of retail algorithmic trading as part of innovation that needs to be recorded at the OJK. Once recorded, the OJK will include a provider of retail algorithmic trading in a regu - latory sandbox. The OJK will then further analyse the activities to determine whether the provider may continue their services in retail algorith - mic trading. Additionally, in a press release on the IDX’s mission for 2018–21, one item was to increase securities transaction liquidity by per - fecting the features and capacity of the trading system (including to anticipate customers that use algorithmic trading and high-frequency trading as their trading methods). The mission was then implemented with the introduction of an automated ordering feature in the securities trading platform operated by securities brokers that allows users to order securities through the platform based on algorithms and parameters in the platform. One concern with the use of high-frequency and algorithmic trading is the potential breach of the market manipulation rule under the Indonesian Capital Market Law, which prohibits action that is misleading with regard to trading activity and manipulation of securities prices. 7.2 Requirement to Be Licensed or Otherwise Register as Market Makers When Functioning in a Principal Capacity Market makers in Indonesia are only recognised for trading in commodities futures. market maker is defined as a party continuously quoting sell or purchase orders during trading hours. The futures exchange and futures clearing house will jointly determine parties appointed as market makers with the approval of the head of Bap-
pebti . However, there are no specific registration requirements for market makers within the con - text of high-frequency and algorithmic trading in commodities futures. For securities trading, the OJK is still preparing a regulation that will require the registration of market makers at the stock exchange. 7.3 Regulatory Distinction Between Funds and Dealers This is not applicable in Indonesia. See 7.1 Crea- tion and Usage Regulations . 7.4 Regulation of Programmers and Programming There is still no specific regulation in Indonesia on the development and creation of trading algo - rithms. To the extent that programmers are only involved in the creation of the system but not actual trades, it is unlikely that they would fall under the supervision of the OJK, Bappebti , the BI or the IDX. However, if the activities progress to involvement in actual trades, they may fall within the ambit of the OJK’s digital finance inno - vation rule and would thus need to be recorded with the OJK. By virtue of the new OJK Regulation No 28 of 2022, which is an amendment to its predeces - sor, OJK Regulation No 70/POJK.05/2016 on Business Operations of Insurance Brokers, Rein - surance Brokers and Insurance Loss Assessor Companies ( “OJK Reg, 28” ), insurtech is finally covered by a comprehensive regulatory regime. Previously, the insurtech business was largely unregulated, classified as a fintech cluster, and categorised as an FSTI under the OJK. 8. Insurtech 8.1 Underwriting Processes
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