ESMA – Coordination with National Competent Authorities regarding pre-trade controls according to MiFID II

Through a press release on January 11, ESMA (European Securities and Markets Authority) announced its collaboration with the National Competent Authorities (NCA) for a joint supervisory action to assess the implementation of pre-trade controls (PTC) according to MiFID II by investment firms in the EU employing algorithmic trading techniques.

These PTCs, governed by the MiFID II framework, that specifies the organizational requirements, are used by investment firms to conduct checks to limit the submission of erroneous orders for execution on trading venues.

Following the “Flash Crash” in May 2022, ESMA, along with National Supervisory Authorities, decided to focus throughout 2024 on the implementation of PTC criteria within the Eu.

The joint supervisory action will also cover other aspects, including:

  • defining credit and risk limits and their interaction with PTC, and
  • the monitoring and governance framework related to PTC.