The European Securities and Markets Authority (ESMA) has published a supervisory briefing on algorithmic trading under the revised Markets in Financial Instruments Directive (MiFID II). The briefing is intended to support consistent supervision across the EU and focuses on key areas where supervisory practices have diverged, including pre-trade controls, governance arrangements, testing frameworks and the outsourcing of algorithmic trading systems. It offers guidance to investment firms and national supervisors on key concepts and areas such as the structuring of outsourcing arrangements, the interaction between AI and algorithmic trading and targeted guidance on pre-trade controls. The briefing is non-binding and not subject to a 'comply or explain' mechanism. ESMA will continue to monitor market and technological developments and may update the briefing or develop further convergence tools as needed.
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