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Regulatory expectations for algorithmic trading

Regulatory expectations for algorithmic trading

Sound risk management practices for algorithmic trading issued by the HKMA

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The HKMA undertook a round of thematic examinations focused on algorithmic trading (algo-trading) in 2019. Seven Authorized Institutions (AIs), mainly international banks using algorithms for making investment decisions, were covered in the thematic examinations.

The objective of the examinations was to assess the adequacy and effectiveness of AIs’ risk management practices relating to algo-trading activities, including governance and oversight, development and testing of algorithms, and risk monitoring and controls. The scope of the algo-trading activities covered by the HKMA circular is broader than the SFC Code of Conduct requirements on algo-trading.

This publication summarises the HKMA’s expectations for algo-trading activities, and compares the HKMA and SFC requirements.

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