The Association for Financial Markets in Europe (AFME) and the Investment Association (IA) have today published an updated version of the Equities Electronic Order Handling Questionnaire incorporating the obligations and requirements set out under MiFID II.
The initiative, which was originally launched in March 2016, establishes a common framework for buy-side clients to request information from electronic trading providers in the European equity markets.
The Questionnaire assists in facilitating the fair and accurate sharing of information on the operation of algorithms between investors and their broker-dealers. Through this process, it aims to enable safer and more efficient algorithmic trading. Since its launch, the initiative has gained increasing traction as market participants recognise the benefits of having a standard framework.
April Day, Managing Director, Equities at AFME, said:
With MiFID II due to be implemented in January 2018, the Questionnaire covers electronic trading practices, including how an individual firm’s processes and decision-making frameworks facilitate best execution. Expanding on the requirements last set out in ESMA’s guidelines on systems and controls for automated trading, we have updated our Questionnaire to incorporate the obligations and requirements which are applicable under the new regime. The aim is to ensure that it remains a useful way to efficiently manage the exchange of important information on electronic order handling and dissemination of change notices.
Ross Barrett, Capital Markets Specialist at the IA, commented:
This initiative is a best practice example of the Buy and Sell Sides successfully coming together to improve the practices involved in algorithmic trading. We have updated the Questionnaire to ensure that as soon as MiFID II comes into effect both sides can continue to benefit from the standard framework it offers. The publication of this Questionnaire is one example of how the industry is taking the initiative to improve the transparency and efficiency of markets to the benefit of the end investor.
Split into seven sections, the questionnaire covers best execution, trading venue selection, algorithmic trading, non-displayed liquidity, transaction cost analysis, client confidentiality and risks and controls.
The scope of the Questionnaire is limited to equity/equity-like European Economic Area (EEA) securities which are traded through a firm based in the EEA that is a regulated firm under MiFID and associated national laws, unless otherwise specified.
The full Questionnaire can be found on both AFME and the IA’s websites.