Dubai’s Virtual Assets Regulatory Authority published its Exchange Services Rulebook, establishing mandatory governance, disclosure, and risk management standards for licensed VASPs offering crypto derivatives. 

The framework covers both margin trading and exchange-traded derivatives (ETDs) and grants VARA broad oversight powers, including the authority to suspend trading and adjust margin requirements, according to a document on the regulator’s website. 

Margin trading and derivatives rules

Under the new rules, VASPs may only offer margin trading if explicitly authorized in their license. To obtain approval, firms must submit detailed terms and conditions, including a template margin trading agreement, and demonstrate “appropriate” systems and controls. 

Before opening a margin trading account, VASPs must collect information from each client to determine suitability, including financial position, investment objectives, and trading experience, VARA said in the document.  

Margin accounts must be segregated from other trading accounts, the regulator added, noting that firms cannot use one client’s funds to finance margin trading for another client, even with client consent. 

Notably, VASPs are required to provide clients with a written statement of account at least monthly and monitor accounts on an ongoing basis. The obligation extends to issuing an “early warning notification" when a client’s ownership percentage in the account falls to a specified level, followed by a prompt notification if the balance drops below the required maintenance margin. If the client fails to remedy the shortfall within a reasonable timeframe, the VASP must sell virtual assets from the account to restore the required margin level.

For firms offering exchange-traded derivatives, VARA requires a separate approval process. VASPs must demonstrate that the underlying virtual assets meet defined standards, including analysis of circulating supply, future supply, and concentration of ownership.

At the same time, VASPs may only provide ETD services to clients who have been assessed as understanding the associated risks and having the ability to meet financial obligations. 

VASPs offering ETD services must also establish and maintain an insurance fund, with a minimum balance set by VARA. The fund can consist of virtual assets, fiat currency, or stablecoins approved by the regulator. 

For both services, VARA said exchange transactions must settle within 24 hours of trading execution, subject to factors outside the firm’s control, such as limitations or malfunctions in distributed ledger technology not operated by the VASP or its affiliates.

Code of conduct and market surveillance 

The rulebook mandates that VASPs publish and enforce a code of conduct for all participants on their trading venues. That code must grant the VASP the authority to impose disciplinary actions ranging from warnings and trading prohibitions to expulsions and criminal referrals. VARA said it retains the authority to pursue additional remedies and may delegate enforcement powers to a VASP with written consent.

Per the rulebook, VARA can suspend trading of any virtual asset if it suspects noncompliance with its market conduct provisions. Firms are also required to share surveillance data with the regulator, including details on large positions, inventory levels, and any action taken to manage position limits.

Meanwhile, the rulebook requires that any VASP offering exchange services maintain a board with at least one independent director, defined by a strict set of disqualifying criteria. An individual cannot serve as an independent director if they have held senior management roles at the firm within the preceding two years, have served on the board for more than seven years, or hold 10% or more of the firm’s share capital.

VASPs are further required to submit annual compensation details for board members and committee members to VARA, including salaries, bonuses, and any virtual asset-based incentives. The regulator said it will keep that information confidential unless disclosure is required by law.