The European Securities and Markets Authority (ESMA) has published a supervisory briefing which includes practical tools and clarified expectations as regards how national competent authorities oversee algorithmic trading activity under Mifid II.
The move comes amid continued growth in automated execution across European equities and derivatives markets.
The briefing is expected to centre on “key areas where supervisory practices have diverged, including pre-trade controls, governance arrangements, testing frameworks and outsourcing of algorithmic trading systems”, said ESMA.
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The briefing also incorporates supervisory considerations linked to the growing deployment of artificial intelligence within trading workflows, specifying considerations for the use of the technology.
ESMA explained: “This section aims to help supervisors assess new risks and ensure that firms adopt robust and responsible approaches when deploying advanced technologies in their trading operations.”
The briefing has been labelled a nonbinding convergence tool, set to complement existing requirements and is aimed at supporting NCAs in adopting a harmonised approach when it comes to overseeing these processes.
More to follow…