On 26 February 2026, the European Securities and Markets Authority (ESMA) issued a Supervisory Briefing on algorithmic trading across the EU.
The Supervisory Briefing draws on insights from a previous Common Supervisory Action on pre-trade controls, as well as supervisory experience and discussions with Member State competent authorities (NCAs).
Background
Algorithmic trading is defined in Article 4(1)(39) of the Markets in Financial Instruments Directive II (MiFID II) as trading in financial instruments where a computer algorithm automatically determines individual parameters of orders. Any trading in which a computer algorithm is involved determining any aspect other than merely the routing of an order to an execution venue or post-trade processing of transactions can be considered algorithmic trading. Even if a human would intervene in the trading process, the involvement of a computer algorithm determining any individual parameter of the order for other purposes than order routing or post-trade processing, would make this type of trading algorithmic trading.
Purpose
The purpose of the Supervisory Briefing is to support NCAs in assessing compliance with the MiFID II algorithmic trading requirements. It complements existing guidance and seeks to clarify expectations in areas where evidence of divergence in supervisory practices has emerged. It focuses on governance, testing, outsourcing, and the interpretation of key concepts of algorithmic trading and algorithms.
The Supervisory Briefing also provides targeted guidance on pre-trade controls which are intended to prevent the sending of erroneous orders and the malfunctioning of an investment firm’s system which could trigger disorderly markets conditions.
Next steps
ESMA will share the Supervisory Briefing with NCAs to support day to day supervision.
The Supervisory Briefing may support the development of internal checklists and training materials for supervisory staff.
Investment firms may use this briefing to verify their compliance with the requirements on algorithmic trading.
ESMA will continue to monitor market and technological developments and may update the Supervisory Briefing or develop further convergence tools as needed.