EstoniaVäärtpaberituru seadus Sections 82^15 and 82^16, Algorithmic Trading and Direct Electronic Access Controls
Väärtpaberituru seadus, §§ 82^15 and 82^16
In force since .
An AI sector rules rule binding private bodies.
As of .
What it requires
- If you are an investment firm engaged in algorithmic trading, including high-frequency algorithmic trading technique, apply suitable and effective systems and risk controls so that the trading IT system is resilient, has sufficient capacity, applies appropriate trading thresholds and limits and prevents erroneous orders, following Delegated Regulation (EU) 2017/589 and Regulation (EU) 2022/2554 (Väärtpaberituru seadus, section 82^15(1)).
- Keep an effective business continuity arrangement for trading system failures and test the systems fully (section 82^15(5)).
- Notify the Financial Supervision Authority and the competent supervisory authority of the trading venue that you engage in algorithmic trading, and on request give the Financial Supervision Authority information on your algorithmic trading and systems (section 82^15(8) and (9)).
- Keep records of your algorithmic trading and, if you use high-frequency algorithmic trading technique, record precise, chronological data on every order submitted, cancelled and executed and every quotation made on a trading venue (section 82^15(11)).
- If you give a client direct electronic access to a trading venue, apply effective systems and controls to assess the client's suitability, review that assessment regularly, ensure the client observes trading thresholds and limits and monitor its trading, and conclude a binding written agreement under which you remain responsible (section 82^16(1) and (4)).
What this law does
Section 82^15(1) requires an investment firm that engages in algorithmic trading, including high-frequency algorithmic trading technique, to apply suitable and effective systems and risk controls so that its trading IT system is resilient, has sufficient capacity, applies appropriate trading thresholds and limits and prevents erroneous orders. In applying those measures the firm follows Commission Delegated Regulation (EU) 2017/589 and Regulation (EU) 2022/2554.
Section 82^15(5) requires an effective business continuity arrangement to deal with trading system failures, and full testing of the systems. Finantsinspektsioon, the Financial Supervision Authority, supervises compliance with the Act. Under section 82^15(8) the firm notifies the Financial Supervision Authority, and the competent supervisory authority of the trading venue, that it engages in algorithmic trading.
On request the firm gives the Financial Supervision Authority information on its algorithmic trading and the systems it uses, including a description of its trading strategies, the trading parameters or limits, the testing of the systems and the main compliance and risk controls.
A firm that uses high-frequency algorithmic trading technique records precise, chronological data on every order submitted, cancelled and executed and every quotation made on a trading venue, and gives them to the Financial Supervision Authority on request.
Section 82^16(1) requires a firm that gives a client direct electronic access to a trading venue to apply effective systems and controls to assess the client's suitability, review that assessment regularly, ensure that the client observes appropriate trading thresholds and limits and monitor the client's trading, and does not allow direct electronic access without those measures.
The firm concludes a binding written agreement with the client under which the firm remains responsible for meeting the requirements of the Act.
When LexLint raises it
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