ESMA_QA_1491

Status: ✅ Answer Published

Link to ESMA Q&A tool: https://www.esma.europa.eu/publications-data/questions-answers/1491

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Regulatory Context

Regulation : MIF2

Level 1 Regulation: Markets in Financial Instruments Directive II (MiFID II) Directive 2014/65/EU- Secondary Markets

Level 2 Regulation: No information available

Level 3 Regulation: No information available

Topic: Direct Electronic Access and algorithmic trading

Subject Matter: Direct Electronic Access (DEA) and algorithmic trading - Article 17 of MiFID II and RTS 6 - Third party systems with algorithmic trading functionalities

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Question

Submission Date: 15 July 2022

How should firms ensure compliance with the requirements in Article 17 of MiFID II and RTS 6 when using third party systems which offer algorithmic trading functionalities?

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ESMA Answer

Answer Date: 15-07-2022

[ESMA 70-872942901-38 MiFID II MiFIR market structures Q&A, Q&A 3.34] When firms use third party systems offering algorithmic trading functionalities, they are ultimately responsible for compliance with the relevant requirements in Article 17 of MiFID II and RTS 6, as specifically detailed in Article 4 or RTS 6. However, lacking direct control over the system, its operation and the algorithms deployed, these firms might not be materially able to ensure that all requirements are met. In such instances, firms can ensure compliance with those technical requirements that cannot be otherwise met by the firm itself through contractual arrangements with the system provider, where the latter commits to ensure that the system, its operation and the algorithms deployed are compliant with the relevant legal requirements.

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This document was automatically extracted from the ESMA EMIR Q&A database.