Use of robots on financial markets

L e x i n g ® | G l o b a l n e t w o r k o f a tt o r n e y s s p e c i a l i z e d i n d i g i t a l a n d e m e r g i n g t e c h n o l o g y l a w

L e x i n g ® | SWITZERLAND| Sébastien Fanti | [email protected]

SEBASTIEN FANTI SWITZERLAND

1. Context and perspective2. International legal framework3. Swiss legal framework4. Expected evolutions5. Conclusions6. Questions and answers

Sommaire



• Today, High-Frequency Trading (HFT) represents between 40% and 60% of the exchanges on the financial marketplaces.

• HFT is characterized by high-speed purchases and sales of shares, faster than a blink.

• The number and the number of orders have exploded.

• Today, 90% of the transactions are carried out by sophisticated algorithms.

1. Context and perspective



• HFT is subject to lots of controversies; in France bill is being drafted in order to forbid HFT (Bompard’s legislation).

• The French Financial Markets Authority condemned for the first time in December 2015 an HFT player and the trader Euronext Paris… 5 million euros!

• There is a debate between experts regarding the safeguards (smart circuit breaker, taxes…)

1. Context and perspective



• The International Organization of Securities Commissions (IOSCO) came up with recommendations in a report published in October 2011 ("Regulatory Issues Raised by the Impact of Technological Changes on Market Integrity and Efficiency").

• These recommendations aim at encouraging markets’ integrity and efficiency and reducing risks.

2. International legal framework



• In its Markets in Financial Instruments Directive (MiFID II), EU introduced measures to fight the negative impacts of algorithmic trade and high-frequency negotiations (cf. art. 17 et 48).

• Careful attention was paid to the definition of the different concepts and a quantitative threshold was determined.

2. International legal framework



• Swiss Government considers that the current legal framework is sufficient to prevent abuses.

• Legislation matches the international regulations and takes account of European law.

• The Financial Market Infrastructure Act (FMIA) and the Financial Market Infrastructure Ordinance (FMIO) represent the current legal framework.

3. Swiss legal framework



• By article 30 of the Financial Market Infrastructure Act (FMIA), the trading platform that operates a technical system must have a system that guarantees an ordered treatment also in the event of an intense activity.

• This provision aims at allowing to introduce measures in order to limit the perverse effects of algorithmic trade and high-frequency transactions.

3. Swiss legal Framework :



• Market manipulations are punishable under Swiss law.

• Offences can be committed by using algorithmic trade software, in particular as part of high-frequency algorithmic trade.

• Articles 30 and 45 FMIA protect clients from cheating.

• To date, there has been no trial on this matter in Switzerland.

3. Swiss legal Framework



• The IOSCO consists of 34 securities markets regulators around the globe

• Only a few providers in the world produce high-frequency trading (HFT) cables, which connect traders to exchanges

• If these providers are breached in some way, numerous firms would be vulnerable

• High frequency trading could contribute to more volatility in markets and aggravated sudden market crashes

4. Expected evolutions (Securities Markets Risk Outlook 2016 – IOSCO)



• This could be seen as a risk to the financial system.

• HFT is a risk that continues to concern respondents as a potential threat to fair, efficient, and transparent markets.

• Although major events such as the flash crash have not occurred recently, regulators continue to assess whether price formation is fair and the market is sufficiently protected against glitches.

4. Expected evolutions (Securities Markets Risk Outlook 2016 – IOSCO)



• HFT involves evident risks and moral issues (complete parasitism of high-frequency predators).

• Inability of regulators to carry out checks in order to prevent abuses

• Unless these checks are carried out, there is a systemic risk!

5. Conclusions



5. Q & A :



Thank you for your attention

Follow me on: Twitter : @sebastienfanti

Facebook: https://www.facebook.com/sebastien.fantiLinkedin: http://ch.linkedin.com/in/sebastienfanti/

Un grand homme est celui qui ne perd pas son cœur d’enfant (Mencius)

L e x i n g ® Argentina | Belgium | Brazil | Canada | China | Colombia |Costa Rica | France | Germany | Greece | India | Israel | Italy | Japan | Lebanon | Luxemburg | Mexico | New-Caledonia | Norway | Portugal | Senegal| South Africa| Spain | Switzerland | Tunisia | United Kingdom | United States of America

GERMANYBeiten BurkhardtAndreas (Dr.) Lober & Tim CaesarWesthafen Tower, Westhafenplatz 1 60327 Frankfurt a.M.T. +49 69 756095-0F. +49 69 [email protected]

BELGIUMPhilippe & PartnersJean-François Henrotte [email protected] www.philippelaw.eu

LiegeBoulevard d’Avroy, 2804020 LiegeT. +32 4 229 20 10F. +32 78 15 56 56

BrusselsAvenue Louise, 2401050 BruxellesT. +32 2 250 39 80F. +32 78 15 56 56

CANADALanglois avocats, S.E.N.C.R.L.Jean-François De [email protected]

Montreal1002, rue Sherbrooke Ouest, 28th FloorH3A3L6 MontrealT. +15 148 42 95 12F. +15 148 45 65 73

QuebecComplexe Jules-Dallaire, T32820, Laurier Bld, 13th FloorG1V 0C1 Quebec City T. +14 186 50 70 00F. +14 186 50 70 75

SPAINLexing SpainMarc GallardoRonda General Mitre, 16408006 BarcelonaT. +34 93 476 4048F. +34 93 476 [email protected]

U.S.AFrançoise GilbertPalo Alto, CA 94303USAT. [email protected]

FRANCEAlain Bensoussan AvocatsAlain Bensoussan& Frédéric Forster58, Boulevard Gouvion Saint-Cyr75017 ParisT. +33 182 73 05 05F. +33 182 73 05 [email protected]@lexing.lawwww.alain-bensoussan.com

ISRAELLivnat, Mayer & CoRussell D. MayerJérusalem Technology ParkBuilding 9, 4th FloorP.O. Box 48193 Malcha91481 Jerusalem T. +97 226 79 95 33F. +97 226 79 95 [email protected]

ITALYStudio Legale ZalloneRaffaele Zallone31 Via Dell’Annunciata20121 MilanT. +39 229 01 35 83F. +39 229 01 03 [email protected]

LUXEMBOURGPhilippe & PartnersMarc Gouden, François Cautaerts& Jean-François Henrotte41 avenue de la Liberté1931 LuxembourgT. +352 266 886F. +352 266 887 00 [email protected]

MEXICOLanglet, Carpio y AsociadosEnrique OchoaTorre Punta Santa FeProlongación Paseo de la Reforma #1015, Torre B,Piso 3, Desp. 303Col. Desarrollo Santa FeC.P. 01376, México, D.F.T. +52 55 25 91 [email protected]

NORWAYFøyen Advøkatfirma DAArve FøyenPostboks 7086 St. Olavs pl.0130 OsloT. +47 21 93 10 00F. +47 21 93 10 [email protected]

U.KPreiskel & Co LLPDanny Preiskel4 King’s Bench WalkTempleLondon EC4Y 7DLT. +44 20 7332 5640 F. +44 20 7332 [email protected]

SWITZERLANDSébastien Fanti Avocat & Notaire8B rue de Pré-Fleuri, CP 4971951 SionT. +41 27 322 15 15F. +41 27 322 15 [email protected]

SOUTH AFRICAMichalsons AttorneysJohn [email protected] www.michalsons.co.za

JohannesburgGround FloorTwickenham BuildingThe Campus, 57 Sloane & Cnr Main Road2021 BryanstonT. +27 11 568 0331F. +27 86 529 4276 Cape TownBoyes DriveSt James7945 Cape TownT. +27 21 300 1070F. +27 86 529 4276

TUNISIACabinet Younsi & YounsiYassine Younsi4, Rue Petite Malte1001 TunisT. +216 71 346 564 [email protected]

ARGENTINAEstudio MilléRosario MilléSuipacha 1111 - piso 11C1008AAW Buenos AiresT. +54 11 5297 7000F. +54 11 5297-7009 [email protected]

BRAZILMelchior, Micheletti e Amendoeira AdvogadosSilvia Regina Barbuy MelchiorRua do Rócio, 351 cj 102Vila Olímpia 04552-000São Paulo SPT./F. +55 11 [email protected]

CHINAJade & FountainJun [email protected]

Shanghai 31/F Tower BFar East International Plaza317 Xian Xia Road,Zip code: 200051lT. +86 21 62351488F. +86 21 62351477

BeijingUnit 803, Floor 8, Tower E1Oriental Plaza,No.1 E.Chang An Avenue,Zip code: 100738 T. +86 10 85183285F. +86 10 85183217

COLOMBIAMarrugo Rivera & AsociadosIvan Dario Marrugo Jimenez Cra. 52 No. 45-15 P. 1 La EsmeraldaBogotáT. +57 571 4760798 - 3158738 F. +57 571 3244200 [email protected]

LEBANONKouatly & Associates AttorneysRayan Kouatly63, rue Amine Mneimné, BP 11 2242 Beirut T. +961 175 17 77 F. +961 175 17 [email protected]

JAPANHayabusa Asuka Law OfficesKoki Tada4ème étageKasumigaseki Building 3-2-5 KasumigasekiChiyoda-kuTokyo 100-6004T. +81- ( 3 ) -3595-7070F. +81- ( 3 ) [email protected]

PORTUGALAlves Pereira & Teixeira de Sousa RLJoão P. Alves PereiraAvenida da Liberdade 383º 1250-145 LisbonT. +351 21 370 01 90F. +351 21 382 90 [email protected]

NEW-CALEDONIACabinet Franck RoyanezFranck Royanez15 rue Edouard GlasserMotor Pool98800 NoumeaT. +687 24 24 48F. +687 20 24 24 [email protected]

GREECEBallas Pelecanos & Associates L.P.CGeorge Ballas & Theodore Konstantakopoulos10 Solonos Street, Kolonaki,106 73 AthensT. +30 210 36 25 943F. +30 210 36 47 [email protected]@balpel.grhttp://www.ballas-pelecanos.com

INDIAPoovayya & CoSiddhartha GeorgeDharani [email protected]@poovayya.netwww.poovayya.net

BangaloreThe Estate, Level One, 121,Dickenson Road,Bangalore 560 042Karnataka, India.T. +91 80 4115 6777F. +91 80 4115 6888

Mumbai Free Press House, 8th Floor, #83, Nariman Point,Mumbai, 400021,Maharashtra, India.T. +91 22 3072 2426F. +91 22 3072 2437

SENEGALSCP Faye et DialloCheikh FAYE40, Avenue Malick SY,Résidence « Linguère »,4ème ÉtageDakarSénégalT. +221 33 823 60 [email protected]

COSTA RICALex Investments & Services (Lexis Abogados)Gabriel Lizama OligerOfiplaza del Este, Edificio A , tercer pisoDistrito de MercedesCanton de Montes de Oca,Provincia de San JoséT. : +506 2253-1726F. : +506 [email protected]

Use of robots on financial markets

Law

Transcript of Use of robots on financial markets