UK regulator PRA publishes statements on algorithmic trading risk expectations

The Prudential Regulation Authority (PRA) has published a policy statement (PS) that provides feedback to responses to a consultation paper on algorithmic trading. It also contains the final supervisory statement: (SS) 5/18 Algorithmic trading. The supervisory statement (SS) sets out the PRA’s expectations of a firm’s risk management and governance of algorithmic trading  In setting these expectations, the PRA considers that a firm’s risk controls are critical to ensuring appropriate governance arrangements are in place when engaging in algorithmic trading. Such controls express the risk appetite of a firm’s governing body and include, for example, restrictions as to the types of security that can be traded and eligibility of counterparties. The expectations in SS5/18 will take effect from Saturday 30 June 2018.

This PS is relevant to firms that engage in algorithmic trading and that are subject to the rules in the Algorithmic Trading Part of the PRA Rulebook (the ‘Algorithmic Trading Part’) and Commission Delegated Regulation (EU) 2017/589. The SS applies to all algorithmic trading activities of a firm including in respect of unregulated financial instruments such as spot foreign exchange (FX).

Read the policy statement and supervisory statement

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