Equities Electronic Trading Questionnaire ready for MiFID II

Of relevance to: Buy-side clients who need to request information from electronic trading providers in the European equity markets
Key date: Applicable from 3 January 2018

The Association for Financial Markets in Europe and the Investment Association have published an updated version of the Equities Electronic Order Handling Questionnaire, incorporating the obligations and requirements set out under MiFID II.

Originally launched in March 2016, this Questionnaire establishes a common framework for buy-side clients to request information from electronic trading providers in the European equity markets, expanding on the requirements set out in ESMA’s guidelines on systems and controls for automated trading which cover:

  1. the provision of direct market access or sponsored access by an investment firm as part of the service of the execution of orders on behalf of clients;
  2. the use of an electronic trading system, including a trading algorithm, by an investment
    firm for dealing on own account or for the execution of orders on behalf of clients; and
  3. the operation of an electronic trading system by a regulated market or a multilateral trading

Split into seven sections, the Equities Electronic Order Handling Questionnaire covers:

  1. General
  2. Best Execution and Venue Selection
  3. Algorithmic Trading
  4. Liquidity Sources
  5. Transaction Cost Analysis / Post-trade Analysis
  6. Client Confidentiality, and
  7. Risks and Controls.

The Questionnaire assists in facilitating the fair and accurate sharing of information on the operation of algorithms between investors and their broker-dealers, encouraging and enabling safer and more efficient algorithmic trading. Market participants recognise the benefits of having this standard framework which covers electronic trading practices, including how an individual firm’s processes and decision-making frameworks facilitate best execution.

The scope of the Questionnaire is limited to equity/equity-like European Economic Area (EEA) securities which are traded through a firm based in the EEA that is a regulated firm under MiFID and associated national laws, unless otherwise specified.

The responses to the questions are valid for professional clients, unless otherwise specified in the specific response.