SWITZERLAND Law and Practice Contributed by: Lukas Morscher and Lukas Staub, Lenz & Staehelin
7.3 Regulatory Distinction Between Funds and Dealers The transparency requirements in relation to algorithmic trading apply to all market partici - pants alike (see 7.2 Requirement to Register as Market Makers When Functioning in a Principal Capacity ). In addition, fund managers are sub - ject to the regulatory regime under FinIA, and funds are governed by the Collective Investment Schemes Act, while dealers may qualify as secu - rities firms (see 7.2 Requirement to Register as Market Makers When Functioning in a Principal Capacity ). 7.4 Regulation of Programmers and Programming Under Swiss law, there is no specific regulation of programmers and programming. However, the FMIA requires marketplaces to identify and monitor algorithmic and high-frequency trad - ing (see 7.1 Creation and Usage Regulations ), which may indirectly affect programmers and programming. In Switzerland, insurtech has been growing fast, in part due to organisations pursuing business models that are based on general challenges faced by traditional insurers, such as new regu - latory frameworks, alternative capital sources and ongoing low interest rates. In general, tradi - tional insurers face lower barriers when entering the insurtech market as they already have the required licences and can focus on developing the technology. To date, there is no specific legislation governing insurtech business models. Therefore, any regu - latory implications for insurtech models must be 8. Insurtech 8.1 Underwriting Processes
ket or a neighbouring market (so-called circuit breakers). It must also be possible to identify orders generated by algorithmic trading. In addition, traders who engage in algorithmic trading and high-frequency trading are subject to various obligations. In particular, they must ensure their systems cause no disruption to the trading venue and are subject to appropriate testing of algorithms and control mechanisms. Furthermore, certain transparency requirements apply (see 7.2 Requirement to Register as Mar- ket Makers When Functioning in a Principal Capacit y). It should be emphasised that higher fees may be charged for typical high-frequency trading techniques. 7.2 Requirement to Be Licensed or Otherwise Register as Market Makers When Functioning in a Principal Capacity Pursuant to the FMIO, authorised trading facili - ties are required to impose upon all participants an obligation to notify the trading facility of the use of algorithmic trading and to flag all orders made by algorithmic trading. In addition, a market participant requires authori - sation as a securities firm by FINMA pursuant to FinIA if: • it trades in securities in its own name for the account of clients; • it trades in securities for its own account on a short-term basis and publicly quotes prices for individual securities upon request or on an ongoing basis; or • it trades in securities for its own account on a short-term basis, operates primarily on the financial market and is a member of a trading facility.
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