Audit of Market Making activities with a dedicated focus on
automated trading systems

 

Project overview

The introduction of MIFID 2 in 2018 has reinforced supervisory powers for trading activities with a specific focus on algoritmic trading. In seeking to be aligned with all the requirements of this new regulation it was decided to launch an audit focusing on the automated trading systems.

offre projet weefinRisk, Regulatory and Compliance

client weefin

Investment bank third rank

service concerné par le projet

Capital Market

Durée mission

4 weeks

team weefin du projet

 1 Data Consultant and 1 Strategic Consultant

Stake

Automated trading activity has been launched with a marketing goal to extend their knowledge of the market place. The algorithmic trading does not  yielded PNL. If all the regulatory requirements are not respected there is a risk of penalty and a reputational risk arising from negative public opinion regarding this default.

The stakes of the mission are:

  • Evaluate the investments needed,
  • Help Bred to decide if these investments worst it.

Objectives

  • Verify if they comply with the regulatory requirements,
  • Avoid all risks of penalty or decrease of the reputation,
  • Improve their internal process in order to comply with the regulation.

Main constraints

  • Dependencies of the client’s contributors,
  • No legitimacy of the sponsor of the mission among the global organisation of client,
  • Full owner of the mission, no integration among the teams.

Execution

Benefits

  • Comply with regulatory requirements (RTS 6, Mifid 2),
  • Secure the internal process to avoid all risks of human error or fraude,
  • Improve their process to implement more traceability, more formalism.

Method

Audit methodology (risk weighting matrix, risk analysis, work program, recommendation, regulatory matrix)

Activities

  • Study of the reglementation
  • Interviews : Front Office, Market Risk Direction, Permanent Control
  • Quantitative analysis
  • Test

Delivable

  • Final report
  • PPT presentation
  • Testing report
  • Regulatory matrix
  • Work program
  • Interview report
  • Interview questionnaire
  • Risk weighting sheet

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