On 21 August 2025, the FCA published a multi-firm review assessing principal trading firms’ (PTFs) algorithmic control frameworks and set out good practices and are where there was room for improvement from firms.

Background

Investment firms engaged in algorithmic trading are required to comply with MiFID regulatory technical standards specifying (RTS) 6 in relation to organisational requirements.

In February 2018, the published a multi-firm review of Algorithmic Trading in Wholesale Markets. In August 2023, the FCA also sent PTFs a Dear CEO letter outlining its focus on this area. This most recent review included 10 PTFs with varying approaches to algorithmic trading and looked at certain data requested and information gathered from meetings with firms.

Findings

The FCA set out the follow examples of areas where firms could improve their approach, including:

  • Governance: in completing a self-assessment some firms did not address all elements of RTS 6, some compliance functions did not have strong technical knowledge of algorithmic trading or weren’t sufficiently involved in processes limiting the ability to challenge, in some cases the algorithmic inventory did not specify who was approved to operate the algorithm, some firms did not have clear policies and procedures from testing and deploying algorithms including where these were developed by a third party.
  • Development and testing: some firms had poorly defined conformance testing leading to poor records, simulations sometimes lack sophistication and there was a focus on operating effectiveness rather than conduct risks, some firms didn’t have formal procedures for adoption and had unclear ownership of key elements of this process.
  • Risk controls: ownership of pre and post trade controls was sometimes poorly defined; compliance staff also had a lack of oversight of these controls leading to poor understanding.
  • Market abuse surveillance: in certain firms there was not enough done to invest in market surveillance systems or update them, and so firms did not have formal procedures and governance structures or were under resourcing pressure in relation to market abuse alerts leading to a longer time to investigate these chases.

Next steps

The FCA set out that it encourages PTFs engaged in algorithmic trading to consider how they might improve their algorithmic control frameworks in light of these findings. The FCA also explained that it will continue to assess these controls as part of its ongoing supervision.