Dubai VARA Publishes Exchange Service Rules Book: Crypto Derivatives and Margin Trading Included in a Mandatory Regulatory Framework

The Dubai Virtual Assets Regulatory Authority (VARA) has officially released the “Exchange Services Rulebook,” establishing mandatory governance, disclosure, and risk management standards for licensed virtual asset service providers (VASP) that offer crypto derivatives services. The new rules also cover margin trading and exchange-traded derivatives (Exchange-Traded Derivatives, ETD), and grant VARA broad regulatory powers, including the ability to pause trading and adjust margin requirements.

Margin trading regulations: additional authorization required; funds must be strictly segregated

Under the new rules, if a VASP wants to provide margin trading services, it must obtain explicit authorization on top of its existing license. When applying, firms must submit detailed terms and fine print, including a template agreement for margin trading, and demonstrate that they have established “appropriate” systems and internal control mechanisms.

Regarding client suitability, before opening a margin account, a VASP must collect information about each client’s financial situation, investment objectives, and trading experience, among other details, to assess whether the client is suitable. Margin accounts must also be strictly segregated from other trading accounts. A firm may not use any one client’s funds to provide financing for another client’s margin trading, even if it has the client’s written consent, with no exceptions.

In terms of ongoing monitoring obligations, a VASP must at least provide clients with written account statements monthly and continuously monitor account status. When a client’s ownership proportion in the account falls to a specific threshold, the firm must issue an “early warning notice.” If the account balance further drops below the maintenance margin requirement, it must immediately notify the client. If the client fails to make up the shortfall within a reasonable period of time, the VASP must sell the virtual assets in the account to restore the required margin level.

Exchange-traded derivatives (ETD): independent approval required; a mandatory insurance fund must be established

Firms offering ETD services must go through an independent approval process. VASPs must demonstrate that the underlying virtual assets meet established standards, including analysis of circulating supply, forecasts of future supply, and assessments of concentration of holdings.

In terms of client eligibility, ETD services may only be provided to clients who have been assessed as “understanding the relevant risks” and “having the ability to meet financial obligations.” In addition, VASPs providing ETD services must establish and maintain an insurance fund. VARA will set minimum balance requirements for the fund, which may be composed of virtual assets, fiat currency, or stablecoins approved by VARA.

For both margin trading and ETD, the rulebook requires that all trades settle within 24 hours after execution, except for factors beyond the firm’s control, such as distributed ledger technology malfunctions.

Code of conduct and market surveillance: VARA retains the power to pause trading

The rulebook requires that VASPs develop and enforce a code of conduct for all participants in trading venues. The code must grant the VASP the authority to take disciplinary actions, ranging from warnings and trading bans to expulsion and the referral of cases for criminal prosecution. VARA also retains the power to pursue additional remedial measures and, subject to obtaining written consent, may delegate enforcement powers to the VASP.

In market surveillance, VARA may suspend the trading of any virtual assets if it suspects that a firm has violated market conduct rules. Firms are also required to share monitoring data with the regulator, including details of large holdings, inventory levels, and any actions taken to manage position limit caps.

Board independence requirement: seven-year term, 10% shareholding cap

The rulebook also sets requirements for the board structure of VASPs providing exchange services: at least one independent director must be on the board, and the standard for determining independence is quite strict—independence will be lost in the following situations:

Holding an executive position at the company within the past two years

Serving on the board for more than seven years

Holding 10% or more of the company’s equity

Remuneration disclosure obligations: annual reporting required for board and committee pay

The rulebook also requires VASPs to submit to VARA each year the remuneration details of board members and members of each committee, including salaries, bonuses, and any incentive compensation paid in the form of virtual assets. VARA states that the relevant information will be kept confidential unless disclosure is required by law.

The rulebook released by VARA this time marks Dubai’s regulatory shift for crypto derivatives services from principle-based guidance to detailed operational rules. Among global major crypto regulatory frameworks, it is one of the most meticulous documents in terms of requirements for derivatives products. For exchanges and VASPs that have entered or plan to enter the Dubai market, requirements such as segregating margin accounts, conducting client suitability assessments, and establishing insurance funds will entail a significant level of compliance cost.

This article Dubai VARA releases exchange services rulebook: crypto derivatives and margin trading included in a mandatory regulatory framework was first published on Chain News ABMedia.