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BaFin Issues a New FAQ Regarding Algorithmic Trading

May 15, 2014

Summary: BaFin’s new FAQ regarding its Circular 06/2013 (BA) – Requirements for Systems and Controls Relating to Algorithmic Trading by Institutions (the Circular) provides more precise information regarding certain statements in the Circular. In algorithmic trading computers implement trading strategies without further human input. In order to limit the risks that can arise and prevent market manipulation, ESMA released certain guidelines in 2013. As a result, the requirements under the German Banking Act and the Securities Trading Act were modified. The Circular sets out in principles-oriented fashion requirements that institutions must observe if they engage in algorithmic trading and provide either direct of assisted market access.

The FAQ, published on 6 May 2014, are intended to clarify the regulatory expectations of BaFin and to explain existing requirements. The present Client Alert supplements our Client Alert dated 2 May 2014 and summarizes the FAQ.

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Download: Compliance Alert (pdf 317917 bytes)