PANAMA Law and Practice Contributed by: Kharla Aizpurua O., Roberto Vidal and Miguel Arias, Morgan & Morgan
6.5 Order Handling Rules Regarding securities trades on an organised exchange, Rule 5-2003 issued by the SMV, which regulates order handling, mandates that brokerage firms require their clients to issue orders that are clear and precise in scope and meaning, ensuring both the issuer and recipi - ent fully understand their effects. Orders placed over the phone may be recorded with prior client authorisation. Entities receiving orders must exe - cute them or take necessary measures to deliver them to the responsible entity on the same day of receipt or, if not possible, on the next busi - ness day. The receiving entity must include the order in its register in strict chronological order, assigning each a consecutive number and iden - tifying the broker who received the order. These rules apply exclusively to entities handling orders for securities and financial instruments traded on organised exchanges in Panama or globally. 6.6 Rise of Peer-to-Peer Trading Platforms Peer-to-peer trading platforms of registered securities are currently not permitted in Panama, as the Securities Law requires that all trades of registered securities must be carried out through a stock exchange and the investors’ brokers and their brokerage accounts. Panama does not regulate trading in securities that are not subject to registration and other assets (such as cryptocurrencies). For peer-to-peer trading to prosper in Panama, the Securities Law would need to be amended to specifically exclude these innovative platforms from the definition of stock exchanges and establish clear rules on the type of transactions that peer-to-peer trading platforms can handle.
However, fraud, money laundering, and cyber - security threats are big concerns for Panama’s regulators, so changes are unlikely to happen very quickly. 6.7 Rules of Payment for Order Flow Payment for order flow is not regulated in Pan - ama. 6.8 Market Integrity Principles Under the Securities Law, markets should be designed to prevent deceptive and manipulative practices or any other actions that affect market transparency, to promote fair practices in securi - ties trading, and to encourage the development of an efficient market. 7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations High-frequency and algorithmic trading are not regulated in Panama. 7.2 Requirement to Be Licensed or Otherwise Register as Market Makers When Functioning in a Principal Capacity Market makers are regulated by Agreement 2-2011 of the SMV, which regulates securities brokers and dictates that stock exchanges must establish the rules governing market makers. The Latin American stock exchange has estab - lished a rulebook for market makers, which indicates that market makers are “fundamental pillar in financial markets, providing the opportu - nity to expand market reach and even engage in international transactions, leading to the benefit of being more recognised in other countries” . Under said rulebook, any securities broker can apply to be a market maker, which application
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