Via: The Trade News

Despite continued concern from some market participants, new proposals contained in the current draft of MiFID II would not severely hamper brokers from customising their execution algorithms, according to Bradley Duke, European head at Knight Direct, the electronic trading business of agency broker Knight Capital.

MiFID II contains a series of measures that would require firms to provide descriptions of their trading algorithms, ensure they have adequate pre-trade risk controls in place, and warrant that algorithms are properly tested before use. Many industry players had initially expressed fears such requirements would impede the ability of investment firms to innovate and customise their algos – and that it might lead to loss of critical intellectual capital.

Endorsed by the European Commission (EC), MiFID II compels an investment firm which engages in algorithmic trading to “at least annually provide to its home competent authority a description of the nature of its algorithmic trading strategies, details of the trading parameters or limits to which the system is subject, the key compliance and risk controls that it has in place and details of the testing of its systems”. 

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