ESMA · ESMA_QA_1599 Answer Published

Automated Order Router (AOR) and algorithmic trading

Regulation
Markets in Financial Instruments Directive II (MiFID II) Directive 2014/65/EU- Secondary Markets
Topic
Direct Electronic Access and algorithmic trading
Submitted
2016-12-19
Answered
2016-12-19
Browse MiFID Register → More Q&As on this regulation →

Question

Can a functionality be considered as an Automated Order Router (AOR) if it submits the same order to several trading venues? Would that qualify as algorithmic trading?

Answer

[ESMA 70-872942901-38 MiFID II MiFIR market structures Q&A, Q&A 3.3] According to Recital 22 of Commission Delegated Regulation (EU) 2017/565 [1] , an AOR is characterized by only determining the trading venue or trading venues to which the order has to be sent without changing any other parameter of the order (including modifying the size of the order by “slicing” it into “child” orders). In case the same unmodified order is sent to several trading venues to ensure execution and it is executed in one of these venues, the functionality can also cancel the unexecuted orders in the other venues without qualifying as algorithmic trading. [1] Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive (OJ L 87, 31.3.2017, p. 1–83).
View original on European Securities and Markets Authority ↗

This Q&A is published by European Securities and Markets Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

Similar Q&As

Direct Electronic Access (DEA) and algorithmic trading - Trading functionalities with automated management of orders

Answered 2022-07-15

Direct Electronic Access (DEA) and algorithmic trading - Trading systems - RTS 7

Answered 2019-12-05

Can a trading venue use its trading systems and platforms to arrange transactions that are then reported and ultimately executed on another trading venue?

Answered 2018-10-04

Algorithmic trading

Answered 2016-12-19

Algorithmic trading

Answered 2016-12-19

More Q&As on this topic

Market making in securitised derivatives

Answered 2024-01-08

Direct Electronic Access (DEA) and algorithmic trading - Trading venues

Answered 2022-09-23

Direct Electronic Access (DEA) and algorithmic trading - Article 17 of MiFID II and RTS 6 - Third party systems with algorithmic trading functionalities

Answered 2022-07-15

Direct Electronic Access (DEA) and algorithmic trading - Trading functionalities with automated management of orders

Answered 2022-07-15

Direct Electronic Access (DEA) and algorithmic trading

Answered 2021-02-03

📋 Track EU financial regulation continuously

Forseti monitors EU financial regulation and delivers personalised alerts anchored to verified official sources.

Start free trial → Learn more

14-day free trial. No credit card required.