What is the challenge?
MiFID II introduces a new regulatory regime for firms that engage in algorithmic and/or high frequency trading (HFT).
In general, firms carrying out algorithmic trading (including HFT) and trading venues allowing or enabling algorithmic trading will have to have specific, effective systems, procedures and arrangements in place to ensure resilience and capacity. This includes testing and monitoring, as well as business continuity plans and mechanisms to control trading.
MiFID II defines a high-frequency trader as one sending at least two messages per second, for a single instrument on any trading venue, or at least four messages per second in respect to all instruments being traded on a venue.
This goes further than any previous regulation and more firms will need to register their HFT activities. Compliance will mean storing detailed time series records of algorithmic trade history for at least five years.
These records must include all fields outlined in Annex III of regulatory technical standard (RTS) 6. That is, 28 fields for each decision to buy or sell, and 35 fields for each outgoing and executed order.
What is Thomson Reuters doing to help?
We help you meet HFT-specific transaction reporting requirements with access to modular tools and industry-leading reference data.
Uniquely, our modular tools and industry-leading reference data mean that you – an HFT trading organization – can shape your trading platforms to meet specific requirements.
With Tick History, we provide unparalleled access to global historical tick data, and the ability to back-test trading algorithms in a pre- and post-trade testing environment.
Tick History delivers un-manipulated global trade and order book quote messages – microsecond time-stamped data back to 1996s – and allows market makers and prop trading firms who quote and trade algorithmically to reconstruct the order book and replay the market accurately.
These can be applied for the purposes of back-testing algos and stress testing against volatile or fast market conditions, both pre-deployment (conformance testing) and post-deployment, as part of required annual validation requirements.
Tick History is recorded from Thomson Reuters Elektron Real Time feeds, covering more than 45 million global, cross-asset OTC and exchange-traded instruments worldwide – across more than 500 trading venues, as well as third party contributed data.
Thomson Reuters DataScope Select will carry all relevant flags and reference data for meeting the requirements of RTS 6.