[co-author: Andrea Manta, Giulia Marinai]
On 26 February 2026, the European Securities and Markets Authority (“ESMA”) published a supervisory briefing to support consistent supervision of algorithmic trading in the EU under Directive 2014/65/EU on markets in financial instruments (“MiFID II”).
The supervisory briefing is aimed at providing guidance to both market players (including investment firms and credit institutions) and National Competent Authorities (“NCAs”) on the supervision of algorithmic trading under MiFID II, following a Common Supervisory Action (CSA) undertaken with NCAs as well as supervisory experience and discussions with the latter.
The supervisory briefing:
- Gives insights on the interpretation of key concepts, such as ‘algorithmic trading' and ‘algorithm'. In this respect, ESMA clarifies that, even where humans intervene in the trading process, the involvement of a computer algorithm determining any individual parameter of the order (for purposes other than order routing or post-trade processing), would make this type of trading ‘algorithmic trading';
- Promotes convergence in supervisory practices across the EU, in particular as regards outsourcing, testing, and governance of algorithmic trading systems and provides practical guidance on pre-trade controls as well as concrete examples for assessing where a trading system is to be deemed algorithmic within the meaning of MiFID II;
- Touches upon the technological developments resulting from the extended use of artificial intelligence in algorithmic trading, also addressing the interaction with Regulation (EU) 2024/1689 (so-called AI Act).
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