With the growth of illegal investment platforms recently, the Indonesian Commodity Futures Trading Regulatory Agency (Badan Pengawas Perdagangan Berjangka Komoditi or "Bappebti") has blocked numerous unlicensed trading platforms which label themselves as 'robot trading.' Although regular advisory on futures trading has been regulated under Bappebti Regulation No. 6 of 2020 dated July 30, 2020 on Futures Advisors and Futures Advisor Representatives ("Regulation 6/2020"), such advisory does not include the provision of automated advisory or robot trading.

In light of the above, Bappebti issued Regulation No. 12 of 2022 dated September 2, 2022 on Provision of Information Technology-based Advice in the Form of Expert Advisors in the Commodity Futures Trading Sector ("Regulation 12/2022"). With Regulation 12/2022, Bappebti now regulates the use of IT-based advisory or robo trading services in the commodity futures trading industry for the orderly, fair, efficient, effective, and transparent futures trading activities.

We set out below the key provisions of Regulation 12/2022.

♦ Introduction of an IT-Based Advisors (Expert Advisors)

Advice provided by a Futures Advisor, in the form of information and/or recommendation, may be given by an IT-based advisor or Expert Advisor. An Expert Advisor is defined as a form of advice that may automatically conduct: market monitoring, calculation on the probability to enter or exit the market, placement of reasonable transactions, and risk management by considering the needs of a client. Regulation 12/2022 highlights that an Expert Advisor shall only be treated as a tool for a transaction, whereas the decision making shall be made by clients.

♦ Requirements for Futures Advisors to Offer Expert Advisors

Any Futures Advisor who wishes to conduct the activity of an Expert Advisor shall first obtain an approval from Bappebti. To obtain such approval, a Futures Advisors must:

  1. have a business license as a futures advisor from Bappebti;
  2. have an application, system, or program (the "System") which must incorporate certain features and have been recommended by one of the Futures Exchanges;
  3. have a proof of cooperation with a developer or company that develops the System which shall be used as an Expert Advisor in the event the System is not developed by the Futures Advisor itself;
  4. have a special customer relation division that shall be the Futures Advisor Representative to make any updates on the algorithm program and after – sales service as well as education;
  5. have a minimum Rp1,000,000,000 (one billion Rupiah) of additional paid-up capital; and
  6. have a track record as a Futures Advisor which has a good assessment success rate based on the average total historical data of its clients' transactions.

♦ General Obligations in Provision of Expert Advisor

In providing IT-based advice through the Expert Advisor, Regulation 12/2022 stipulates certain obligations for a Futures Advisor. Such obligations apply in terms of (i) matters that must be taken into consideration with regard to the clients and the products offered (e.g., a client's need, and financial capacity and knowledge on the use of the Expert Advisor); (ii) items that must be possessed by the Expert Advisor (e.g., the manual book, transaction records, and transparency of the algorithm); (iii) matters that must be offered in providing the Expert Advisor to clients (e.g., education, update on the algorithm, and after-sales services); and (iv) matters that must be considered in accepting clients who may use the Expert Advisor (e.g., a client's margin capability of at least Rp50,000,000 (fifty million Rupiah) and a client's understanding of the risk and procedures of the Expert Advisor in futures trading).

♦ Reporting Obligations to Bappebti

A Futures Advisor which provides the Expert Advisor shall submit regular reports and/or incidental reports if requested by Bappebti. The reports shall include information on (i) clients who use the Expert Advisor as well as the advice given to the clients, and (ii) changes of features in the Expert Advisor. Certain events such as changes in the System shall also be disclosed to and approved from the client before being periodically reported to Bappebti.

♦ Certain Prohibitions in Provision of Expert Advisor

Regulation 12/2022 sets out certain prohibitions for a Futures Advisor or a Futures Advisor Representative in offering Expert Advisor to clients or prospective clients. A Futures Advisor and a Futures Advisor Representative are prohibited from offering Expert Advisor before understanding a client's need, financial capability, and other related issues. Further, a Futures Advisor that offers Expert Advisor is prohibited from conducting certain actions, including (i) guaranteeing fixed profits for the use of Expert Advisor, (ii) conducting transactions on behalf of a client, (iii) offering profit sharing from the use of Expert Advisor; and (iv) conducting direct selling or multi-level marketing scheme.

A Futures Advisor or Futures Advisor Representative is also subject to Regulation 6/2020.

♦ Disclosure Statement and Acknowledgement on Risks of Using Expert Advisor

Under Regulation 12/2022, a client is required to complete a disclosure statement and an acknowledgement form on the use of the Expert Advisor which is given by a Futures Advisor. The disclosure statement shall be based on the format set out in Regulation 12/2022 and shall be read and recorded in the form of video by the client to be uploaded and/or sent to the Futures Broker.

Additionally, a Futures Advisor which offers the Expert Advisor shall provide an acknowledgement form to be signed by a client which form states that the Futures Advisor is not liable for any risks and losses occurred based on the futures trading transaction. However, any liability shall be borne by a Futures Advisor in the event that the Futures Advisor fails to comply with Regulation 12/2022.

With the growth of illegal investment platforms recently, the Indonesian Commodity Futures Trading Regulatory Agency (Badan Pengawas Perdagangan Berjangka Komoditi or "Bappebti") has blocked numerous unlicensed trading platforms which label themselves as 'robot trading.' Although regular advisory on futures trading has been regulated under Bappebti Regulation No. 6 of 2020 dated July 30, 2020 on Futures Advisors and Futures Advisor Representatives ("Regulation 6/2020"), such advisory does not include the provision of automated advisory or robot trading.

In light of the above, Bappebti issued Regulation No. 12 of 2022 dated September 2, 2022 on Provision of Information Technology-based Advice in the Form of Expert Advisors in the Commodity Futures Trading Sector ("Regulation 12/2022"). With Regulation 12/2022, Bappebti now regulates the use of IT-based advisory or robo trading services in the commodity futures trading industry for the orderly, fair, efficient, effective, and transparent futures trading activities.

We set out below the key provisions of Regulation 12/2022.

♦ Introduction of an IT-Based Advisors (Expert Advisors)

Advice provided by a Futures Advisor, in the form of information and/or recommendation, may be given by an IT-based advisor or Expert Advisor. An Expert Advisor is defined as a form of advice that may automatically conduct: market monitoring, calculation on the probability to enter or exit the market, placement of reasonable transactions, and risk management by considering the needs of a client. Regulation 12/2022 highlights that an Expert Advisor shall only be treated as a tool for a transaction, whereas the decision making shall be made by clients.

♦ Requirements for Futures Advisors to Offer Expert Advisors

Any Futures Advisor who wishes to conduct the activity of an Expert Advisor shall first obtain an approval from Bappebti. To obtain such approval, a Futures Advisors must:

  1. have a business license as a futures advisor from Bappebti;
  2. have an application, system, or program (the "System") which must incorporate certain features and have been recommended by one of the Futures Exchanges;
  3. have a proof of cooperation with a developer or company that develops the System which shall be used as an Expert Advisor in the event the System is not developed by the Futures Advisor itself;
  4. have a special customer relation division that shall be the Futures Advisor Representative to make any updates on the algorithm program and after – sales service as well as education;
  5. have a minimum Rp1,000,000,000 (one billion Rupiah) of additional paid-up capital; and
  6. have a track record as a Futures Advisor which has a good assessment success rate based on the average total historical data of its clients' transactions.

♦ General Obligations in Provision of Expert Advisor

In providing IT-based advice through the Expert Advisor, Regulation 12/2022 stipulates certain obligations for a Futures Advisor. Such obligations apply in terms of (i) matters that must be taken into consideration with regard to the clients and the products offered (e.g., a client's need, and financial capacity and knowledge on the use of the Expert Advisor); (ii) items that must be possessed by the Expert Advisor (e.g., the manual book, transaction records, and transparency of the algorithm); (iii) matters that must be offered in providing the Expert Advisor to clients (e.g., education, update on the algorithm, and after-sales services); and (iv) matters that must be considered in accepting clients who may use the Expert Advisor (e.g., a client's margin capability of at least Rp50,000,000 (fifty million Rupiah) and a client's understanding of the risk and procedures of the Expert Advisor in futures trading).

♦ Reporting Obligations to Bappebti

A Futures Advisor which provides the Expert Advisor shall submit regular reports and/or incidental reports if requested by Bappebti. The reports shall include information on (i) clients who use the Expert Advisor as well as the advice given to the clients, and (ii) changes of features in the Expert Advisor. Certain events such as changes in the System shall also be disclosed to and approved from the client before being periodically reported to Bappebti.

♦ Certain Prohibitions in Provision of Expert Advisor

Regulation 12/2022 sets out certain prohibitions for a Futures Advisor or a Futures Advisor Representative in offering Expert Advisor to clients or prospective clients. A Futures Advisor and a Futures Advisor Representative are prohibited from offering Expert Advisor before understanding a client's need, financial capability, and other related issues. Further, a Futures Advisor that offers Expert Advisor is prohibited from conducting certain actions, including (i) guaranteeing fixed profits for the use of Expert Advisor, (ii) conducting transactions on behalf of a client, (iii) offering profit sharing from the use of Expert Advisor; and (iv) conducting direct selling or multi-level marketing scheme.

A Futures Advisor or Futures Advisor Representative is also subject to Regulation 6/2020.

♦ Disclosure Statement and Acknowledgement on Risks of Using Expert Advisor

Under Regulation 12/2022, a client is required to complete a disclosure statement and an acknowledgement form on the use of the Expert Advisor which is given by a Futures Advisor. The disclosure statement shall be based on the format set out in Regulation 12/2022 and shall be read and recorded in the form of video by the client to be uploaded and/or sent to the Futures Broker.

Additionally, a Futures Advisor which offers the Expert Advisor shall provide an acknowledgement form to be signed by a client which form states that the Futures Advisor is not liable for any risks and losses occurred based on the futures trading transaction. However, any liability shall be borne by a Futures Advisor in the event that the Futures Advisor fails to comply with Regulation 12/2022.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.