When I got into work this morning, I
decided not to return a missed call, not to review a document,
not to read a report, not to ask some colleagues for advice,
not to fill in my timesheet for last month, not to think about
further job training and, most importantly, not to join an
internal weekly meeting which was covering a topic not relevant
to me. Instead I decided to write this blog first.
If you thought that my introduction was
rather long winded, you will not be pleased to hear that your
algo audit trails could look exactly like that too, if
Esma’s current proposal for record-keeping makes
it into the final Level 2 text of Mifid II.
Esma suggests that audit trails should
include all market data messages relevant when "algorithms make
a decision to submit or not submit an order".
This unfortunate wording suggests that
firms not only have to store market data when the algo decides
to act (add, amend, cancel order), but also when the algo makes
the decision not to do anything.
How this could be relevant is beyond me,
as I don’t see why doing nothing could harm the
market. But I certainly do know that algos can decide to do
nothing many times a second, thus easily increasing the size of
your audit trail by a huge factor.
We will have to wait to see what ESMA
finally decide on that point. In the meantime, I am not going
to get a coffee or a tea, not going to read my emails and not
going to schedule that meeting nor worry about the next piece
of regulation coming. Instead, I think I might just go and buy
some shares in a hard disk producer, just in case!