Algorithmic trading firms

The ability to process vast amounts of data and execute trades with precision and speed has made algorithmic trading omnipresent across various asset classes and global markets. But because of this rapid growth, alongside the complexity and risks of algorithmic trading, regulators have introduced stricter regulations designed to safeguard market integrity, ensure fair practice, and minimise systemic risk.

Our expertise in this area is built on the diverse backgrounds of our people. Our advice draws on experience as regulators, consultants and compliance officers. We understand the FCA perspective while also appreciating the challenges attached to regulatory alignment.

Self-assessment

In the UK, investment firms are required to conduct an annual self-assessment and validation process. We can help firms complete this process, the complexity of which stems from the need to cover a variety of areas: algorithmic systems and strategies, governance, business continuity arrangements, and overall compliance with RTS 6 regulations.

Stress testing

Our prudential experts can help make sure your stress testing exercises and scenarios effectively demonstrate robust risk management and control processes. We will ensure that the scenarios are appropriately tailored and that the stress testing is appropriately run.

Health check

We can conduct a thorough assessment of your support arrangements for algo trading. Our process involves benchmarking your systems and controls against regulatory requirements and industry best practice, so we can identify any gaps. We provide you with a comprehensive analysis that highlights areas of improvement and ensures your compliance with regulations and industry standards. This includes:

• evaluating the governance framework underpinning new algorithms and material change approval
• examining your testing procedures
• verifying the completeness and currency of your algo inventory
• reviewing comprehensively your pre and post-trade controls.

Implementation advice

If you are introducing algo trading or direct electronic access (DEA), we will help you determine what set of obligations is applicable to you. We will help you design a compliant framework, supporting with your systems and controls, and the governance arrangements. We will ensure it is commensurate to the nature, scale and complexity of your business model.

Financial crime and market abuse

Any firm engaging in algo trading must make sure their Market Abuse Risk Assessment (MARA) appropriately covers this activity, taking into consideration the risks specific to this area and their corresponding controls. Indeed, surveillance procedures may need to be automated or adjusted to align with algorithmic trading activity. We can help not only with the MARA buy also with the adjustments or fundamental design of your surveillance arrangements.

Advice to regulators

Given our experience in designing regulatory strategies for some of the most rigorous regulatory regimes, we can offer assistance in updating your supervisory framework to address the emergence of algorithmic trading. We can help define the scope of your supervisory strategy and establish a set of requirements aimed at minimising the potential market disruptions associated with electronic trading.

Training

To ensure compliance with regulations, investment firms involved in algorithmic trading must ensure that their compliance staff possess sufficient understanding of how algorithmic trading systems operate. We offer customised training programs specifically designed to meet your team's needs. Our training sessions provide key insights into relevant requirements and best practice, enabling your staff to stay informed and equipped with the necessary knowledge.