We have conducted a number of cross-firm reviews on themes relating to algorithmic trading. This report summarises our key areas of focus and highlights examples of good and poor practice.
Firms operating in wholesale markets increasingly use algorithms in their trading activities. The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have been reviewing firms’ algorithmic trading activity and have issued supervisory publications. For firms solo-regulated by the FCA, please refer to our publication. Firms regulated by the PRA and FCA should refer to both publications.
Our report summarises the FCA’s five key areas of focus in relation to algorithmic trading:
- Defining algorithmic trading
- Development and testing
- Risk controls
- Governance and oversight
- Market conduct
The PRA publication is a formal consultation on a supervisory statement which sets out expectations for the prudential aspects of risk management and governance of algorithmic trading at PRA regulated firms. This is an area of continuing collaboration and we will continue to work with the PRA to ensure we are coordinated in our approaches going forward.