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ESMA consults on the impact of algorithmic trading

18 December 2020

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has today launched a consultation seeking input from market participants on the impact of requirements under MiFID II/MiFIR regarding algorithmic trading, including high-frequency algorithmic trading.

The Consultation Paper covers the overall approach towards algorithmic trading, in particular:

  • the authorisation regime;
  • provisions for algorithmic and high-frequency traders; and
  • provisions applicable to trading venues allowing or enabling these market participants.

Furthermore, the consultation paper addresses crisis-related issues, such as circuit breakers, and contemporary issues closely linked to algorithmic trading, including the deployment of speedbumps and the sequence of trade confirmations to individual participants versus the public disclosure of transactions.

MiFID II/MiFIR requires the European Commission (EC) to present a report to the European Parliament and the Council, after consulting ESMA, on a number of areas under MiFID II/MiFIR including algorithmic trading.

Next steps

The consultation closes on 12 March 2021. ESMA, based on the input received, will prepare the final review report for submission to the EC by July 2021. Respondents to the consultation are encouraged to provide relevant information, including quantitative data, to support their arguments or proposals.