LUXEMBOURG Law and Practice Contributed by: Andreas Heinzmann, Valerio Scollo and Angela Permunian, GSK Stockmann
effective systems and risk controls in place that ensure, among others, that the trading systems: • are resilient and have sufficient capacity; • are subject to appropriate trading thresholds and limits; • prevent the sending of erroneous orders; and • cannot be used for purposes that are contrary to the EU Market Abuse Regulation. In addition, such systems need to be fully tested and properly monitored, and effective business continuity arrangements need to be in place to deal with any failure of the systems. Engage - ment in algorithmic trading needs to be notified to the CSSF. 7.2 Requirement to Be Licensed or Otherwise Register as Market Makers When Functioning in a Principal Capacity Specific requirements apply in accordance with the MiFID II legal framework if the entity engag - ing in algorithmic trading is pursuing a market- making strategy. An entity is considered to pur - sue a market-making strategy when dealing on its own account, as a member or participant of a trading venue, its strategy involves posting firm, simultaneous two-way quotes of compa - rable size and at competitive prices relating to one or more financial instruments on a single trading venue or across different trading ven - ues, with the result of providing liquidity on a regular and frequent basis to the overall mar - ket. These requirements include entering into a binding market making agreement with the trad - ing venue and carrying out the market making continuously during a specific proportion of the trading hours. In contrast to MiFID II, MiCA covers the term “market participant” . Market participants include, but are not limited to, CASPs, which
are subject to authorisation and rules of trans - parency and consumer protection. In addition, all digital issuers, who may also be considered market participants, should adhere to strict dis - closure requirements. Therefore, market makers may fall under the scope of MiCA if they align with the role of CASPs, namely the buying and selling of financial instruments. 7.3 Regulatory Distinction Between Funds and Dealers The applicable regulations do not distinguish between funds and dealers engaged in high- frequency or algorithmic trading. 7.4 Regulation of Programmers and Programming Programmers who develop and create trading algorithms are not directly regulated, however, the investment firm using such trading algo - rithms or other electronic trading tools must ensure that the trading tools it uses comply with the regulatory requirements (see 7.1 Crea- tion and Usage Regulations ). An investment firm that outsources or procures software or hardware used in algorithmic trading activities remains fully responsible for its legal obligations relating to algorithmic trading.
8. Insurtech 8.1 Underwriting Processes
Insurance underwriting is a licensed activity in Luxembourg, governed by the Law of 7 Decem - ber 2015 on the insurance sector, as amended, and insurance companies located in Luxem - bourg are supervised by the CAA. In particular, insurance contracts are subject to the specific regulatory requirements laid out in the Law of 27 July 1997 on insurance contracts, as amended, which requires, eg, providing certain pre-con -
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