On 18 December 2020, the European Securities and Markets Authority (ESMA) issued a consultation paper on algorithmic trading.
MiFID II / MiFIR require the European Commission to present reports to the European Parliament and the Council, after consulting ESMA, on a number of provisions. Article 90(1)(c) of MiFID II provides in particular for the submission of a report on “the impact of requirements regarding algorithmic trading, including high-frequency algorithmic trading”. The MiFID II mandate is therefore not specific regarding which provisions should be reviewed in the concerned report. The concept of algorithmic trading is however broad, and many provisions and requirements of MiFID II are related either explicit to this type of trading (for example Article 17 of MiFID II) or indirectly (for example direct electronic access or tick sizes).
In the consultation paper, ESMA has considered that it is necessary to adopt a holistic approach and to review all relevant provisions together. The consultation paper therefore covers: (i) the overall approach towards algorithmic trading and high frequency trading and in particular the authorisation regime attached to these types of market participants; (ii) the provisions applicable to algorithmic and high frequency traders; (iii) the provisions applicable to trading venues allowing or enabling these market participants; and (iv) other provisions that aim at better framing the activity of algorithmic and high frequency traders (for example tick size and market making).
The deadline for comments on the consultation paper is 12 March 2021. ESMA, based on the input received, will prepare the final review report for submission to the Commission by July 2021. Respondents to the consultation are encouraged to provide relevant information, including quantitative data, to support their arguments or proposals.