USA Law and Practice Contributed by: Margo H. K. Tank, Michael Fluhr, Deborah Meshulam, Kristin Boggiano, David Stier, Liz S. M. Caires, Adam Dubin, Emily Honsa Hicks, Meghan Carey, Kathleen Birrane and Eric Hall, DLA Piper LLP
6.6 Rise of Peer-to-Peer Trading Platforms
6.8 Market Integrity Principles US securities regulations, at the federal and state level, establish key principles to promote market integrity and prevent market abuse. Additionally, SROs such as FINRA also have similar rules. Some of the key principles include: • promoting laws and rules designed to ensure that market participants have equal access to markets and that pricing and trading prac - tices are fair, transparent, and accurate; • requiring that all investors receive access to basic facts about an investment before buying it; • enforcing laws, regulations, and rules to detect, deter, and prevent wrongdoing of all types, including market manipulation, insider trading, and frontrunning; and • sanctioning and disciplining those who violate securities laws, regulations, and rules. With respect to the CFTC, the core mission of the CFTC is preserving market integrity. The CFTC may pursue manipulation, attempted manipula - tion, fraud, and false reporting of any commodity in interstate commerce. 7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations In the US, high-frequency-trading (HFT) and algorithmic trading are regulated by the SEC for securities and the CFTC for commodities. SEC Regulation NMS ensures best execution and prevents trade-throughs and the Market Access Rule mandates pre-trade risk controls for algorithmic trading and post trade surveillance. In 2024, the SEC adopted rules that require market participants that perform dealer func -
The regulation of P2P trading platforms in the US is dependent upon whether the digital asset being traded is a security, a commodity, or another digital financial asset subject to the UCC or other federal or state law. The SEC has asserted that certain P2P platforms offer securities and are subject to US securities laws. The SEC has historically required and enforced registration by different P2P lending platforms. The extent to which decentralised P2P platforms or exchanges are subject to SEC regulation remains unsettled. See 6.4 Listing Standards for discussion of CFTC and SEFs. The extent to which decen - tralised P2P platforms trading CFTC-regulated commodities are subject to CFTC regulation also remains unsettled. See 10. Blockchain . 6.7 Rules of Payment for Order Flow To the extent that US federal securities laws apply to a platform, payment for order flow typi - cally implicates broker-dealer/customer relation - ships and is regulated by SEC and FINRA rules. Also, best execution obligations and anti-fraud provisions can be implicated if payment for order flow results in a broker-dealer directing a trans - action to a platform for execution when better terms are available elsewhere. SEC Regulation NMS has rules that require a broker-dealer to execute in a particular manner. SEC proposed Regulation Best Execution which, if finalised, would apply to digital assets that qualify as securities and impact practices governing payment for order flow.
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