Just as we’re all getting used to the idea of having to flag algos on an EU-wide basis under MiFID II by 2017, the French regulator recently published further
guidance under the French banking bill that came into force in July last year. Amongst other things the French bill targets algorithmic trading/HFT and this recent notice calls for French entities to notify the regulator if they are using automated processes
to send orders to exchanges.
The provision of more meaningful data for the regulator is one of the promises of MiFID II, but questions are already being asked about algo identification and jurisdiction. MiFID II will oblige each exchange to implement an algo
flagging regime, but there is no regulatory mandate to harmonise algo flagging across Europe. Furthermore, post-trade flagging of algos raises potential conflicts with exchange mandated pre-trade flagging.
We’ve already seen the introduction of algo ids for German exchanges under the German HFT Act, introduced back in April 2014. The effort involved in reaching a common
understanding there was significant. So, with an effective date of 1st January 2015, any nuance of a French definition of an algo for notification purposes would need to be turned around tout de suite!