MiFID II and Algorithmic Trading: What You Need to Know Now

ALGORITHMIC SAFEGUARDS: DEFINING BEAUTY, PREVENTING THE BEAST

WHAT IS “ALGORITHMIC TRADING TECHNIQUE?”

  • whether to initiate the order, the timing, price or quantity of the order or
  • how to manage the order after its submission with limited or no human intervention and,
  • does not include any system that is only used for the purpose of routing orders to one or more trading venues or
  • for the purposes of orders involving no determination of any trading parameters or for the confirmation of orders or the post-trade processing of executed transactions.”

UNDERSTANDING AND DELIVERING PEACE OF MIND

KICKING THE TIRES

  • Running high messaging volume tests using the highest number of messages received and sent during the previous six months, multiplied by two
  • Running high trade volume tests using the highest volume of trading reached during the previous six months, multiplied by two

HIGH FREQUENCY TRADING (HFT)

  • An infrastructure designed to minimize network and other latencies including high-speed DEA, proximity hosting or colocation for algorithmic order entry.
  • System-determination of order initiation, generation, routing or execution without human intervention for individual trades and orders.
  • Orders, quotes or cancellations for proprietary dealing in liquid financial instruments and market-making, constituting “high message intraday rates”[4] which consist of an average of at least two messages per second for a single instrument traded on a venue or at least four messages per second for all instruments across a venue. Client order messages are not counted in the “high message intraday rate” calculation.

MARKET MAKING

TRADING TECHNOLOGIES’ SOLUTIONS TO ALGORITHMIC TRADING:

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