ESMA_QA_1599
Status: ✅ Answer Published
Link to ESMA Q&A tool: https://www.esma.europa.eu/publications-data/questions-answers/1599
Regulatory Context
Regulation : MIF2
Level 1 Regulation: Markets in Financial Instruments Directive II (MiFID II) Directive 2014/65/EU- Secondary Markets
Level 2 Regulation: Regulation 2017/565 - MiFID II Delegated Regulation
Level 3 Regulation: No information available
Topic: Direct Electronic Access and algorithmic trading
Subject Matter: Automated Order Router (AOR) and algorithmic trading
Question
Submission Date: 19 December 2016
Can a functionality be considered as an Automated Order Router (AOR) if it submits the same order to several trading venues? Would that qualify as algorithmic trading?
ESMA Answer
Answer Date: 19-12-2016
[ESMA 70-872942901-38 MiFID II MiFIR market structures Q&A, Q&A 3.3] According to Recital 22 of Commission Delegated Regulation (EU) 2017/565[1], an AOR is characterized by only determining the trading venue or trading venues to which the order has to be sent without changing any other parameter of the order (including modifying the size of the order by “slicing” it into “child” orders). In case the same unmodified order is sent to several trading venues to ensure execution and it is executed in one of these venues, the functionality can also cancel the unexecuted orders in the other venues without qualifying as algorithmic trading.
[1] Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive (OJ L 87, 31.3.2017, p. 1–83).
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