ESMA conducting MiFID II review on algorithmic trading

Many provisions and requirements of MiFID II relate either directly or indirectly (e.g. direct electronic access or tick sizes) to algorithmic trading. As a result, a consultation paper from the European Securities and Markets Authority (ESMA) adopts a holistic approach to algorithmic trading and reviews all related provisions together with the aim of having the current framework operating more efficiently.

The first two sections provide an introduction and an overall approach towards algorithmic trading and high frequency trading and in particular the authorization regime attached to these types of market participants, together with some quantitative analysis.

Other sections: discuss the organizational requirements for investment firms that engage in algorithmic trading, including high-frequency traders; focus on the organizational requirements for trading venues that enable algorithmic trading on their systems; and address the other provisions that aim at better framing the activity of algorithmic and high-frequency traders such as tick sizes and market making, while also discussing new issues which have recently emerged on EU markets and are very closely linked to algorithmic trading, such as the deployment of mechanisms called speedbumps and the sequence of trade confirmation to individual participants by trading venues versus the public disclosure of such transactions.

Access the consultation docs

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