EU · MiFID II · TITLE II AUTHORISATION AND OPERATING CONDITIONS FOR INVESTMENT FIRMS · CHAPTER I Conditions and procedures for authorisation
Article 17 MiFID IIAlgorithmic trading
Requires firms engaged in algorithmic trading to have resilient systems with trading limits and risk controls (aligned with DORA), business continuity and testing, to notify their home and venue authorities, and, for high-frequency traders, to keep time-sequenced order records. Firms pursuing market making strategies must provide liquidity continuously under a binding agreement with the venue, and firms providing direct electronic access or acting as general clearing members must have client suitability checks, controls and written agreements; mandates RTS on the details.
Amendments and application dates
| Amending act | Change | Applies from |
|---|---|---|
| Directive (EU) 2022/2556 | Text amended | 17 Jan 2025 |
Level 2: delegated and implementing acts
- RTSIn forceLegal basis
AI summaryRTS 8 on market making: specifies when algorithmic traders pursuing a market making strategy must sign a market making agreement with a trading venue, the agreement's minimum content and the exceptional circumstances that suspend obligations, and requires venues to run fair and non-discriminatory market making schemes for specified liquid instruments.
- RTSIn forceLegal basis
AI summaryRTS 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.
Level 3: ESMA Q&As, guidelines and opinions
- Q&AAnsweredESMA rulebook
AI summaryA market maker in a securitised derivative whose whole issue has been sold and cannot be increased meets the RTS 8 two-way quote requirement by posting bid quotes only; this limited exception is separate from the exceptional circumstances in Article 3 of RTS 8.
- 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&AAnsweredInferred · 80%
AI summaryFunctionalities that automatically manage orders after routing, for example redirecting unexecuted portions to other venues or slicing orders, are algorithmic trading (unlike simple order routers), so the orders must be flagged as such and the firm must meet Article 17 MiFID II and RTS 6.
- Q&AAnsweredInferred · 90%
AI summaryThe RTS 8 requirement for market makers to post simultaneous two-way quotes of comparable size does not stop them voluntarily adding liquidity on either side; only the quotes posted to meet the market making agreement are flagged as such.
- Q&AAnsweredExplicit reference · 90%
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&AAnsweredInferred · 95%
AI summaryA DEA provider's checks and controls under Article 17(5) MiFID II and RTS 6 apply to all clients, whether or not authorised EU firms, and it stays responsible for sub-delegated clients; it must be able to obtain all information the venue's authority needs and must be able to suspend access.
- Q&AAnsweredInferred · 85%
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&AAnsweredInferred · 85%
AI summaryOrders should be flagged as part of a market making strategy under RTS 24 (and RTS 6) only once the firm has concluded a market making agreement with the venue, since the flag distinguishes agreed market making from the firm's discretionary order flow.
- Q&AAnsweredInferred · 95%
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&AAnsweredInferred · 95%
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&AAnsweredInferred · 70%
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.
- Q&AAnsweredInferred · 75%
AI summaryVenues allowing algorithmic trading must publish a maximum bid-ask range for every instrument they trade (they may group instruments), so firms can tell whether they are pursuing a market making strategy requiring an agreement, while market making schemes are needed only for the instruments listed in Article 5 of RTS 8.
- Q&AAnsweredInferred · 90%
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&AAnsweredInferred · 90%
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&AAnsweredInferred · 95%
AI summaryThe algorithmic trading requirements in Article 17 MiFID II cover trading on trading venues only, so electronic OTC activity, such as algorithms generating quotes sent bilaterally to clients, is outside them.
- Q&AAnsweredInferred · 70%
AI summaryDEA users can be high-frequency traders if they meet the HFT definition and message thresholds; they may rely on data from their DEA provider to assess this, but remain responsible for checking that it reflects only their own proprietary trading in liquid instruments.
- Q&AAnsweredInferred · 75%
AI summaryFirms must check at least monthly whether they meet the HFT criteria in Article 19 of Delegated Regulation 2017/565, using message-rate estimates venues must provide on request; an unauthorised firm using HFT must seek authorisation immediately, and any algorithmic trader must notify its home authority and those of the venues it trades on.
- Q&AAnsweredInferred · 90%
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 · 90%
AI summaryThe references to market makers in the exemptions in Article 2(1)(d)(i) and 2(1)(j) MiFID II cover both firms with a market making agreement under Article 17(4) and other market makers within Article 4(1)(7).
- Q&AAnsweredInferred · 70%
AI summaryTrading with an algorithm that involves only a few processes, such as quotes that replicate a venue's prices, is still algorithmic trading.
- Q&AAnsweredInferred · 75%
AI summaryAn automated order router that sends the same unmodified order to several venues, and cancels the unexecuted copies once one is filled, is not algorithmic trading, because it only chooses venues and changes no other order parameter.
- Q&ALegacy Q&A documentESMA rulebook
AI summaryESMA's consolidated legacy Q&A document (ESMA70-872942901-38, final version 13 October 2023) on market structure topics, covering data disaggregation, direct electronic access and algorithmic trading, the tick size regime, multilateral and bilateral systems (including OTFs and systematic internalisers) and access to CCPs and trading venues. It is no longer updated; later Q&As are in ESMA's Q&A tool.
Commentary
No law-firm commentary is linked to this provision yet.
393 more documents relate to MiFID II as a whole without naming an article.
UK counterpart
- DivergedExplicit reference · 90%
EU changes after exit: Directive (EU) 2022/2556 (from 17 Jan 2025).
- MAR 7A.1.2R What?
- MAR 7A.3.2R Systems and controls
- MAR 7A.3.3R Systems and controls
- MAR 7A.3.4R Market making
- MAR 7A.3.5R Market making
- MAR 7A.3.6R Notifications
- MAR 7A.3.7R Notifications
- MAR 7A.3.8R Record keeping
- MAR 7A.4.2R Systems and controls
- MAR 7A.4.3R Client dealings
- MAR 7A.4.4R Notifications
- MAR 7A.4.5R Notifications
- MAR 7A.4.6R Record keeping
- MAR 7A.5.2R Requirements
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Version history
- From 17 Jan 2025
- From 17 Sept 2014 to 17 Jan 2025
Each entry is a consolidated version of the act on EUR-Lex in which this provision appears. The text itself is on the official site.