What happened: The UK Financial Conduct Authority (FCA) published the findings of its multi-firm review of algorithmic trading controls. The review assessed principal trading firms’ compliance with MiFID Regulatory Technical Standards 6 (RST 6) and examined issues including:
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Governance – self-assessment, role of the compliance function, algorithmic inventories, and deployment of algorithms
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Development and testing – conformance testing, simulation testing, and controlled deployment of algorithms
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Risk controls – pre/post trade controls
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Market abuse surveillance – surveillance systems and governance and oversight
Why it matters: The FCA found most firms understood their obligations under RTS 6, but noted wide variation in sophistication and level of compliance. The FCA believes its findings are relevant to any firm that develops or uses algorithmic trading strategies—not just principal trading firms, which were the subject of the study.
What’s next: The FCA encourages firms to review the findings and evaluate how they might help improve their own algorithmic control frameworks. It will continue to assess firms’ algorithmic trading controls as part of its ongoing supervisory work.
