RTS · European Commission
Commission Delegated Regulation (EU) 2017/589 of 19 July 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the organisational requirements of investment firms engaged in algorithmic trading
RTS 6 on organisational requirements for investment firms engaged in algorithmic trading, providing direct electronic access or acting as general clearing members: covers governance and compliance, testing and deployment of algorithms, annual self-assessment, stress testing, kill functionality, market abuse surveillance, pre- and post-trade controls, DEA client due diligence and order record keeping.
Details
| Reference | Delegated Regulation (EU) 2017/589 |
|---|---|
| Issuer | European Commission |
| Published | 31 Mar 2017 |
| CELEX | 32017R0589 |
| In force / applies from | 20 Apr 2017, 3 Jan 2018 |
Provisions it relates to
- Article 17 MiFID II · Algorithmic tradingLegal basis
UK version: UK Delegated Regulation (EU) 2017/589.
Documents that refer to it
- Q&AAnsweredExplicit reference · 90%
AI summaryFirms using third-party systems with algorithmic trading functions remain responsible for complying with Article 17 MiFID II and RTS 6, and may meet technical requirements they cannot control themselves through contractual commitments from the system provider.
- Q&AAnsweredExplicit reference
AI summaryAn algorithmic trading firm's kill functionality under Article 12 of RTS 6 must let a single decision immediately withdraw all or any outstanding orders on all venues, but need not be one piece of software; it may combine procedures and switches suited to the firm's systems.
- Q&AAnsweredExplicit reference
AI summaryArticle 17(6) MiFID II and Chapter IV of RTS 6 apply to every firm acting as a general clearing member, not only those with algorithmic trading clients.
- Q&AAnsweredExplicit reference
AI summaryOnly Tier 1 DEA clients, who obtain the use of a member's trading code directly, have direct electronic access and so lose the own-account dealing exemption in Article 2(1)(d) MiFID II; Tier 2 clients using sub-delegated access do not hold the code and can still rely on the exemption.
- Q&AAnsweredExplicit reference
AI summaryThe 'continuous' monitoring of market and credit risk required of algorithmic traders by Article 17(2) of RTS 6 need not be real-time; intraday or end-of-day checks at entity level suffice, but firms must be able to calculate firm, trader and client exposures in real time if needed and reconcile with counterparties' real-time data.
- Q&AAnsweredExplicit reference · 90%
AI summaryHFT firms must record their HFT activity (algorithmic proprietary trading in liquid instruments on venues) in the RTS 6 Annex 2 format, timestamped to one microsecond, while their non-HFT activity is recorded in the format of Delegated Regulation 2017/565, unless their competent authority agrees to RTS 6 for both.
- Q&AAnsweredExplicit reference
AI summaryThe duty in Article 17(3) of RTS 6 to reconcile electronic logs means algorithmic traders must compare their own trading records with reports from venues, brokers, DEA providers, clearing members and other external sources, to detect discrepancies early and calculate their real exposure before limits are breached.
- Q&AAnsweredExplicit reference
AI summaryAlgorithmic traders' market abuse surveillance must be able to replay trading using market data from external sources, but firms need not store that data internally as long as they can retrieve it for replay.
- Q&AAnsweredExplicit reference
AI summaryWhere the RTS 26 exemption from order-by-order pre-trade checks for venue-traded cleared derivatives applies, general clearing members still need other pre-trade procedures, such as appropriate margining, to manage the risk of clients breaching position limits under Article 26(2) of RTS 6.
- Q&AAnsweredExplicit reference · 90%
AI summaryThe limits that clearing members screen order by order using venue tools under Article 2(2) of RTS 26 are those set under Article 26 of RTS 6.
FCA Handbook
Handbook provisions whose source note cites it:
- MAR 7A.3.2R · Systems and controls
- MAR 7A.3.3R · Systems and controls
- MAR 7A.3.8R · Record keeping
- MAR 7A.4.4R · Notifications
- MAR 7A.5.2R · Requirements
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