MiFID II AI-Assisted Trading Compliance Checklist

Algorithmic and AI-assisted trading in the EU and UK is regulated under MiFID II. Firms must have pre-trade controls, kill switches, and governance for algorithms. AI-driven trading systems also fall within the EU AI Act High Risk category.

Quick Answer

AI-assisted trading is subject to MiFID II algorithmic trading requirements (pre-trade controls, kill switches, five-year logging) and, for High Risk systems, EU AI Act obligations. The FCA's PS19/4 governs UK algorithmic trading. Market abuse surveillance is a parallel obligation under MAR. A senior manager must be designated accountable.

Compliance Checklist (8 items)

Register as an algorithmic trader with your national competent authority (FCA in the UK, relevant NCA in EU member states)
Implement pre-trade controls: maximum order size, maximum position limits, price collar limits, and a kill switch
Conduct annual self-assessment and stress testing of all trading algorithms before deployment
Maintain an algorithmic trading log for five years — must record all orders generated, modified, and cancelled by each algorithm
Apply market surveillance to detect potential market manipulation patterns generated by AI trading logic
For UK firms: comply with FCA PS19/4 and SYSC 10A on algorithmic trading systems
Classify AI trading systems under EU AI Act and apply High Risk obligations if they influence investment decisions at scale
Establish governance oversight with a designated senior manager accountable for algorithmic trading risk

Penalty if not compliant

MiFID II breaches: FCA fines up to £1 million or 10% of annual turnover per violation. Market abuse (MAR) violations can result in criminal prosecution. EU AI Act: up to €30M or 6% of global turnover.

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