PORTUGAL Law and Practice Contributed by: João G Gil Figueira, Rodrigue Devillet Lima and Catarina Andrade Miranda, GFDL Advogados
6.6 Rise of Peer-to-Peer Trading Platforms
necessary to provide services that enhance the quality of those services. However, this is only permitted if the amount is clearly disclosed to the client in advance and does not compromise the investment firm’s obligation to act honestly, fairly, and professionally in the best interests of its clients. The EU Regulation 596/2014 plays a key role in preventing market abuse within financial mar - kets and trading activities. 7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations High-frequency and algorithmic trading (HFAT) is allowed under the Portuguese Securities Code, bringing significant benefits to the market, such as increased speed of orders, increased market liquidity and reduction of bid-ask spreads. However, there are also some risks associated with HFAT, such as: • increased risk of market abuse and manipula - tion; • protection issues for small investors; • volatility and operational risks; and • market fragmentation. The general legal framework for HFAT is set out in MiFID II, and the Portuguese Securities Code, which stipulates that all financial intermediaries deploying such systems must keep registries of all placed orders, including cancellations, which must be immediately made available to the CMVM upon request.
Peer-to-peer platforms have been increasing in numbers, and the crowdfunding market can be described as having gone beyond proof of concept. Both new players and legacy institu - tions have manifested some interest in this new type of platform, which grants investors access to several markets encompassing real estate, socially responsible investments, SMEs, etc. The level of legal sophistication applied in devel - oping such platforms varies depending on the type of investments offered to the public. For example, it is possible to find a solution in the Portuguese market where a crowdfunding plat - form has opted to create hybrid solutions by going through several types of licences, such as payment, crowdfunding, and insurance licenc - es. In contrast, others opt for a more modest approach to retain a crowdfunding licence. The ability to pass the crowdfunding licence to other EU member states, allowing new invest - ment opportunities to different markets, has spiked the interest of some newly established players and legacy institutions. 6.7 Rules of Payment for Order Flow Please see 6.5 Order Handling Rules . 6.8 Market Integrity Principles Financial intermediaries must select their trading and execution venue based on “best execution” policy and provide their clients with information on costs and expenses per service and financial instrument. Additionally, inducement rules prohibit firms from paying or receiving benefits from third par - ties, with a few exceptions. Specifically, firms may accept payments or inducements if they are
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