Earlier this year, the Commodity Futures Trade Supervisory Board (locally known as Badan Pengawas Perdagangan Berjangka Komoditi or Bappebti) closed the operation of some companies that offers robot trading services to Indonesian customers. The so-called robot trading companies offer the services of automated trading of a commodity (either forex, crypto, or gold). The Bappebti closed the services of these companies because they are unlicensed, leading to many customers losing access to their funds and accounts. On 2 September 2022, Bappebti issued a new regulation called the regulation for the Information Technology-Based Advisory Services of Expert Advisors in Commodity Futures Trading 1 (New Regulation). The public wonders whether this is Bappebti’s move to legalize robot trading in Indonesia.
This publication will discuss the important aspect of the New Regulation.
What are the Information Technology-Based Advisory Services of Expert Advisors?
The information technology-based advisory services (Automated Advisory) as regulated in the New Regulation is an automated advisory that can monitor the market, calculate market entry or exit opportunities, place reasonable transactions and risk management by considering each of the client’s needs. In a sense, this is different from the robot trading services that were closed by Bappebti earlier this year as that robot trading does the actual trading for the customers, not only providing advice. On the other hand, the Automated Advisory that is regulated in the New Regulations is only one of the tools to be used by the customers in making a decision. The decision and the responsibility would solely be in the hand of the customers.
Who can Provide this Service?
The Automated Advisory can only be provided by licensed Futures Advisors that have obtained Bappebti’s approval to carry out the Automated Advisory in their service. The Futures Advisors can apply for the license online through Bappebti’s website.
To be able to apply for the license, the Futures Advisors must follow some additional requirements, among others (i) have the application, system or program to be used as the Expert Advisor that has been recommended by any Futures Exchange 2 , (ii) add a minimum of IDR 1 billion (approx. equal to USD 67,000) as its additional issued and paid-up capital.
Other things to Note
The Futures Advisors must assess the knowledge of the customers, the customers’ financial ability, the customer’s risk profile, risk appetite and risk objective before promoting the Automated Advisory to their clients. Further, the Futures Advisors are prohibited from (i) promising that the use of the Automated Advisory will bring a stable profit or risk-free, (ii) doing the transaction on behalf of the customer, (iii) promoting profit-sharing to the customer, (iv) carry out a multi-level marketing scheme to promote the Automated Advisory.
Last, the Futures Advisors must enter into an advisory agreement with their customers to perform the Automated Advisory that clearly states that the Futures Advisors would not be responsible for any risks and losses that may occur to the customers from the trading activity. However, the New Regulation states that notwithstanding this statement, the Futures Advisors must be responsible if the Bappebti founds that the Futures Advisors conduct violation in performing the Automated Advisory, or if there is non-compliance of the feature of the program/application, as required by the New Regulation.
Authors Comment
At a glance, the public may misinterpret the New Regulation as a way for Bappebti in legalizing robot trading activities in Indonesia. In a way, this is correct as the Automated Advisory also uses information technology as its base in providing advisory to the customers. However, this is not 100% the same as the unlicensed robot trading companies that were closed by the Bappebti. The previous robot trading companies carried out the actual trading on behalf of the customers, it promised steady profit to the customers, and it was promoted through a multi-level marketing scheme without analyzing the knowledge of their customers in commodity trading, the financial ability of the customers, etc. These are all prohibited by the New Regulation.
From our point of view, the New Regulation follows the current trend of using information
technology in a more responsible manner. Therefore, only knowledgeable customers are allowed to use the Automated Advisory services – hence, minimizing the risk of layman customers losing their money through commodity trading. The issuance of the New Regulation also ensures that only licensed Future Advisors can perform the Automated Advisory. Therefore, it won’t be easy for an irresponsible business actor that carries out a money game (Ponzi scheme) in tricking layman customers into commodity tradings.
For Further Information, Please Contact:
MetaLAW, Legal Consultant, Jakarta, Indonesia
general@metalaw.id
1 Peraturan Bappebti No. 12 Tahun 2022 tentang Penyelenggaraan Penyampaian Nasihat Berbasis Teknologi Informasi Berupa Expert Advisor di Bidang Perdagangan Berjangka Komoditi
2 The system must have, among others, the following features, (i) open and close of transaction position, (ii) amend stop loss and target profit, (iii) only carry the instruction in accordance with the script or program code, (iv) can send alarm/notification if there is something wrong to the transactions.
