[ A L G O R I T H M I C
T R A D I N G
S U R V E Y ]
The new algo
landscape
The arrival of MiFID II has shaken up the capital markets and
algorithmic trading is no exception. The 2018 algo survey provides
a glimpse into where long-only buy-side firms are setting their
priorities in the early days of the new regulatory landscape.
L
ast year’s algo survey found an industry in
fluctuation ahead of the impending arrival of
MiFID II, as long-only buy-side firms were
deep in preparation for the new regulatory landscape,
prioritising execution quality, market impact and ano-
nymity as key requirements from their algo providers.
The scrutiny on algorithmic trading standards from
regulators is only set to increase now that MiFID II
has finally come into effect throughout the European
markets. UK watchdog the Financial Conduct Authori-
ty (FCA) and the Bank of England’s Prudential Regula-
tion Authority (PRA) made a joint call in mid-February
for financial institutions to increase awareness and
“With further elements of MiFID II still to
be enforced, algo strategies will be heavily
informed by the early stages of the new trading
landscape, as will commercial relationships”
safety controls regarding the use of algorithms, as well
as creating senior roles to take direct responsibility for
algorithmic trading.
Much of this was already part of the changes under
MiFID II, but it’s a clear warning to the markets that
74 // TheTrade // Spring 2018
algorithmic trading will continue
to occupy a spotlight for regula-
tors going forward. The 2018 algo
survey, conducted in the early days
of the new regulatory regime, de-
picts the higher levels of scrutiny
long-only firms are now applying
across the board when it comes to
algorithmic execution capabilities
and options.
While it will be too early for the
buy-side to make definitive judge-
ments on the services provided by
their brokers, trends are already
beginning to emerge as to where
long-only firms will be specifically
questioning algorithmic capabilities.
With further elements of MiFID II
still to be enforced, algo strategies
will be heavily informed by the early
stages of the new trading landscape,
as will commercial relationships.
This critical approach is evident
in the scores provided by this year’s
long-only firms, shown in Figure 1
alongside ratings for the previous