ESMA Withdraws Guidelines on Auto-Trading Venues, Updates Investor Protection Q&As

The updated Q&As includes a clarification relating to best execution models.

Europe’s financial markets watchdog on Wednesday canceled its MiFID guidelines regarding the organizational requirements in automated trading environments. The ESMA’s guidelines were issued in 2011 and were applied to the trading of all financial instruments in an automated platform, as opposed to being restricted solely to the stocks venues.

The decision comes as MiFID II regulations adopted new guidelines on systems and controls in trading platforms, investment firms, and competent authorities. Among other things, the new rules ensure that auto-trading venues have in place sufficient capacity to deal with any surges in trading volume.

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MiFID II was introduced in January 2018 after a one year delay due to the complexity in how it increases transparency in markets to protect investors better.

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The Paris-based watchdog also has published updates to two of its sets of question and answer documents relating to the implementation of investor protection topics under MiFID II/ MiFIR guidelines.

The updated Q&As includes a clarification relating to best execution models—specifically models aimed at firms using a venue’s RFQ system to agree on a trade. A new item also was added to the same section of the Q&A explaining how to use a ‘look-through’ approach and how investment advice can be provided on an independent basis.

The European Securities and Markets Authority (ESMA), which authorizes all trade repositories in the bloc, said its work on investors protection would be key in 2018.

Earlier this year, the regulator launched a new register aimed at making it easier for users to find information on businesses ‎which operate as MiFID trading venues, MiFID data reporting service providers, ‎UCITS management companies, and AIFMD fund managers including funds ‎managed/marketed in the ‎European Union.‎

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