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Next Generation Participant Testing for Trading Venues


Generate New Revenue Streams, Secure Competitive Advantage, meet New Testing Regulations

MiFID II and MiFIR Level 1 were published in the Official Journal of the European Union on 12 June 2014. ESMA ran Level 2 consultation processes in both 2014 and 2015 with the final draft of new Regulatory Technical Standards published on 28 September 2015. These new regulations have added substantially to the current Level 3 regulations laid down by the April 2012 ESMA Guidelines on systems and controls in an automated trading environment for trading platforms, investment firms and competent authorities. This has changed the landscape irrevocably for testing of execution systems and trading algorithms placing new requirements on Trading Venues, their Members and Market Participants.

Trading venues have the responsibility to offer isolated pre-live testing facilities and to require their members to certify that the algorithms they use to trade have passed disorderly market testing and stress testing for each venue in addition to enhanced conformance tests before admitting them to live trading. Investment firms (both buy and sell-side) have the duty to stresstest their trading algorithms for propensity to create or contribute to disorderly trading Investment firms can choose to use the trading venues test systems, develop their own disorderly trading test systems, or use a tbird party service. This offers trading venues a new income stream and additional competitive advantage to early movers by helping members and participants meet their new testing responsibilities.

AlgoGuard Arena by TraderServe offers the ideal solution connecting transparently to a trading venue's own test matching engine and generating dynamic responsive orderbooks statistically representing each instrument and isolated from the live market. Members interact seamlessly by sending orders to and receiving updates from the Trading Venue test system. Test schedules with antagonist algorithms provide the necessary disorderly market and stress testing capabilities with pass/fail drill down reporting and logging.

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