SWITZERLAND Law and Practice Contributed by: Lukas Morscher and Lukas Staub, Lenz & Staehelin
6.7 Rules of Payment for Order Flow The rules on best execution (see 3.3 Issues Relating to Best Execution of Customer Trades ) as well as the general principles on fees apply
gating trades that may involve unlawful market behaviour (if there are clear indications of this), handling insider information in a way that pre - vents unlawful market behaviour and enables its detection, ensuring that people who decide on securities and/or derivative transactions do not have access to insider information and monitor - ing employee transactions. Note that Circular 2013/8 in principle also applies to markets where the FMIA rules on insider trading and market manipulation do not apply (eg, trading outside of stock exchanges, including in tokens). 7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations Algorithmic trading is based on computer algo - rithms that automatically determine the trigger - ing and individual parameters of an order (such as time, price or quantity). High-frequency trad - ing is an extension of algorithmic trading, hav - ing very low delays in order transmission and, usually, a short-term trading strategy. Its distinc - tive feature is a high number of order entries, changes or deletions within microseconds. The FMIA and the related Financial Market Infra - structure Ordinance (FMIO) have introduced measures to address certain negative effects of algorithmic trading and high-frequency trading. The regulation follows international standards and is based on EU law. Specifically, stock exchanges, multilateral trad - ing systems and organised trading systems must ensure orderly trading. In particular, they must ensure that their trading systems are in a position to temporarily suspend or restrict trad - ing if there is a significant price movement in the short term as a result of an effect on this mar -
(see 2.3 Compensation Models ). 6.8 Market Integrity Principles
The FMIA is designed to ensure the transparency and proper functioning of the securities markets, and stipulates two types of market abuse, which are described in the following. Insider Trading The use of insider information is unlawful if the person knows or should know that it is insider information and such person: • exploits it to buy or sell securities admitted to trading on a trading venue in Switzerland or to use financial instruments derived from such securities; • discloses it to another person; or • exploits it to recommend to another person the acquisition or sale of securities admitted to trading on a trading venue in Switzerland or to use financial instruments derived from such securities. Market Manipulation It is unlawful to publicly disseminate information, or to carry out transactions or give buy or sell orders, if the person knows or should know that such behaviour gives false or misleading signals regarding the supply, demand or price of secu - rities admitted to trading on a trading venue in Switzerland. In addition, most FINMA-supervised institutions must also meet certain organisational require - ments regarding market integrity, which FINMA has detailed in its Circular 2013/8 Market Con - duct Rules. The requirements include investi -
820 CHAMBERS.COM
Powered by FlippingBook