Market participants faced the prospect of being regulated under Mifid II
Esma has narrowed its definition of Direct Electronic Access
(DEA) to exclude broker algorithms known as Smart Order Routing
The move will benefit market participants that use DEA
provider platforms or clients, especially the large asset
managers, using broker-provided algorithms via FIX.
SORs are algorithms used to achieve best execution of trades
by determining which venues to use and the best time to submit
According to Esma’s newly published technical
advice on Mifid II, "if SORs are not embedded in the
client’s order generating system, but in the
market member’s/participant’s own
routing system, it is considered to be out of the scope of DEA,
as the client of the market member has lost control over the
time of submission of the order and its lifetime."
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