Algo Trading Controls
The Algo Trading Risk and Governance forum was established in 2022, recognising the unique challenges facing this business within controls and conduct.
We understand the management of risks surrounding the use of Algo Trading by banking corporations is a complex process, and in many places the industry has self-identified this process to be resource intensive, overly complex and granular, and thus inefficient.
In 2023 we ran 4 online forums to support our membership:
- Q1 Forum: Mifid 2
- Q2 Forum: RTS 6 Annual Self- Assessment
- Q3 Forum: Rulebook Requirements, Model Risk Definitions
- Q4 Forum: Orderly Trading vs Operational Resilience
Amongst subjects debated, the Algo Trading Forum highlighted the challenges organisations face in obtaining vendor confirmation, addressing compliance with RTS6, and managing model risk.
The need for effective communication with vendors, standardised approaches, comprehensive conformance testing, and alignment with regulatory requirements were key topics discussed.
Furthermore, the forum investigated different organisational dynamics such as model risk functions, some members found them to have limited value, as the risk was well managed through other means. However, organisations that do not implement model risk functions must provide a robust case to regulators demonstrating their risk management practices. Some organisations employ a tiered approach to models based on their risk degree, allowing for resource allocation and independent model evaluation on a cyclical basis.
In 2024 the agenda will be set by a steering group, made up of global heads of controls and risk management for their respective Algo Trading businesses.