18.III.3.3.2 Algorithmic trading in general

During the MiFID I timeframe technological innovation also resulted in new trading possibilities. Under MiFID I technological developments resulted in trading based on algorithms. Simply put, trading algorithms make trading decisions, instead of humans (i.e. a type of artificial intelligence), in choosing ‘what’ to trade and ‘when’ using benchmarks. Algorithms also enable so-called smart order routers (SORs), instead of humans, to decide ‘where’ the order should be executed.1 The result is that algorithmic trading enables investment firms to keep pace with liquidity and the related pre-trade and post-trade data dispersed across a wide range of venues, which humans no longer can, thereby ensuring that orders still can be executed in accordance with best execution-obligations (e.g. find the best price, reduce market impact, and so forth).2 Algorithmic trading started under MiFID I and is commonplace in equity trading under MiFID II.3 The consequence of the growth in algorithmic trading is a growing demand for equity pre- and post-trade data (in particular so-called ‘non-display data’).4 The result is more emphasis of the EU on ‘reasonable’ and transparent prices of equity pre- and post-trade data, in particular since MiFID II.