Algorithmic Trading Controls - FCA Multi-Firm Review

It's not often the FCA offers such a crowd-pulling headline, but August is a slow month and needs must. In this post we summarise the FCA’s findings, translate FCA-speak into industry vernacular and finish with ‘So what?’ for your consideration.

Key Messages and Findings

• The FCA’s 2025 multi-firm review assessed ten principal trading firms for compliance with MiFID RTS 6, focusing on algorithmic trading controls, identifying both good practices and areas for improvement.

  
  

• Common Weaknesses:

  • Some firms had outdated or insufficient documentation and weak governance around deployment/testing.

    • Translation: You rushed an algo into production without sufficient testing or approvals.

      
      

  • Lapses were found in compliance teams’ technical understanding, which sometimes limited challenge and effective oversight.

    • Translation: Your second line is inexperienced /  poorly trained and potentially ineffective (and also probably your first and third lines of defence).

      
      

  • Inconsistent simulation testing practices and market abuse surveillance systems were observed.

    • Translation: You know your market abuse surveillance is ineffective, yet you’ve done nothing about it.

      
      

  • Ownership and documentation of pre- and post-trade controls often required improvement; some compliance staff lacked adequate understanding of these controls.

    • Translation: Your control framework is ineffective (see second and third lines comment above).

      
      

• Continuity of Key Themes: Like the 2018 review and more recent thematic work in wholesale banking, the FCA maintains its focus on documentation, governance, testing rigor, and conduct risk. The 2025 review, while repeating many of the foundational expectations, stresses “proportionality” for medium and small firms, the importance of linking technical and compliance functions, and the need for rapid adoption of lessons from emerging market stresses or technological shifts.

  
  

• Risk of Breaches and Senior Accountability: Sector-wide, the FCA continues to flag that mere process existence does not equal compliance; evidence, MI reporting, and timely remediation seek to reinforce systemic accountability and senior management engagement.

  
  

‘So what?’ - The FCA will have issued letters to the firms exhibiting decencies. Those findings require prompt remediation. 

For those firms not in the review, Heads of Risk, Regulatory Affairs and Compliance will be expected to bring these findings to the attention of their ExCo and Board. When they ask, ‘Are you confident that our algorithmic trading controls would stand up to FCA scrutiny?’, a ‘Yes’, will put you in a hopeful minority, better would be ‘I think so, but let's check and make sure’. 

Fractyl Consulting has deep expertise in helping buyside and sellside firms translate complex regulatory expectations into actionable, sustainable enhancements - across governance, risk, operations and compliance.

Please contact us for a confidential discussion at www.fractylconsulting.com