ESMA_QA_1602
Status: ✅ Answer Published
Link to ESMA Q&A tool: https://www.esma.europa.eu/publications-data/questions-answers/1602
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: ESMA70-872942901-38 - Q&A on MiFID II and MiFIR market structures topics
Topic: Direct Electronic Access and algorithmic trading
Subject Matter: DEA users - HFT technique
Question
Submission Date: 03 April 2017
Can DEA users be identified as applying a HFT technique?
ESMA Answer
Answer Date: 03-04-2017
[ESMA 70-872942901-38 MiFID II MiFIR market structures Q&A, Q&A 3.6] Yes. As clarified under Recital 20 of Commission Delegated Regulation (EU) 2017/565, DEA users may be classified as HFTs if they meet the conditions set out under Article 4(1)(40) of MiFID II and Article 19 Commission Delegated Regulation (EU) 2017/565. In order to assess whether a DEA user meets the applicable message thresholds, firms accessing trading venues through DEA may contact their DEA provider which is obliged to record the data relating to the orders submitted, including modifications and cancellations under Article 21(5) of RTS 6[1]. However, the onus remains on investment firms to ensure that the estimates provided by the DEA providers accurately reflect their actual trading activity (and in particular that it only takes into account proprietary trading activity on liquid instruments excluding, in the case of DEA users sub-delegating the DEA provider’s code, messages sent by their own DEA clients).
[1] Commission Delegated Regulation (EU) 2017/589 of 19 July 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the organisational requirements of investment firms engaged in algorithmic trading (OJ L 87, 31.3.2017, p. 417–448).
This document was automatically extracted from the ESMA EMIR Q&A database.