Wednesday June 29 2016

News Source: Fund Regulation

Focus: Liquidity Risk Management

Type: General

Country: Cyprus




The Cyprus Securities and Exchange Commission (CySEC) has issued a Consultation Paper in relation to a proposed CySEC circular regarding the selection, use and monitoring of liquidity providers/market makers.

The circular makes several proposals, including the following:

  • where Cyprus Investment Firms (CIFs) are using only one liquidity provider/market maker they should be able to demonstrate that such a choice enables them to consistently get the best results for their clients and to meet their regulatory obligations to deliver best execution at all times.
  • where a CIF enters into a contractual agreement with a non-EU liquidity provider/market maker they must ensure that the third party is a regulated and authorised investment firm with such financial soundness that can justify the trading risk it undertakes.
  • The CIF’s Internal Auditor and Compliance Officer must evaluate and assess whether the management decision to use a specific liquidity provider/market maker evidences sufficient due diligence so as to ensure that the best execution policy is safeguarded.

It is proposed that CIFs be requested to review their policies and procedures to ensure that they fully comply with the provisions of the circular and that they take immediate, corrective action where necessary. Confirmation from the CIF Board to CySEC of their compliance with the circular is also proposed, along with reference to any corrective actions that have been taken, where applicable.

CySEC has invited comments and suggestions on the proposed circular to be made to them by Monday 18th July.

Please click on the above link for further details.