ESMA Issues Supervisory Briefing on Algorithmic Trading and AI Use in EU Markets, February 2026

On February 26, 2026, the European Securities and Markets Authority published a supervisory briefing titled "Supervisory briefing on algorithmic trading in the EU," reference ESMA74-1505669079-10311. This document is directed at national competent authorities to promote consistent supervisory practices across EU member states. It addresses algorithmic trading under MiFID II and covers the emerging application of artificial intelligence in trading systems. It is effective as of its publication date and will be used by national competent authorities in supervisory reviews and on-site inspections.

The governing legal basis is Directive 2014/65/EU (MiFID II), specifically Articles 17 and 48, which require investment firms and trading venues to maintain robust systems and controls for algorithmic trading, including pre-trade risk controls, kill-switch mechanisms, circuit breakers, and annual systems reviews. The briefing elaborates on how these requirements apply to AI-driven trading systems, including machine learning models used for order generation, routing, or execution. It specifies supervisory expectations for documentation, governance structures, and audit trails applicable to AI-assisted strategies in EU capital markets.

Investment firms and trading venues in the EU that deploy algorithmic or AI-driven systems must benchmark their compliance controls against the supervisory standards in this briefing. Firms using machine learning in order management or execution must ensure governance, testing, and audit-trail documentation meet ESMA's expectations. NCAs will reference the briefing when conducting on-site inspections. MiCA-regulated crypto-asset market participants where MiFID II trading rules apply by cross-reference should also review their algorithmic controls against these standards.

The briefing is non-binding and does not carry the force of a technical standard or guideline. Open questions remain about the interaction between MiFID II algorithmic trading requirements and the EU AI Act's risk classifications for AI systems in financial markets, applicable from August 2026. Firms should monitor for possible revisions as AI adoption in trading accelerates.

Our firm advises investment firms, trading venues, and asset managers on MiFID II algorithmic trading compliance and AI governance in EU financial markets, and maintains a dedicated partner network for regulatory matters across EU jurisdictions. We are available to assist with algorithmic trading controls reviews, NCA inspection preparation, and AI Act compliance assessments for trading systems. Our work covers MiFID II systems and controls, algorithmic strategy governance, AI Act compliance for trading systems, MiCA algorithmic provisions, and EU market microstructure regulation.

Source: ESMA, "Supervisory briefing on algorithmic trading in the EU," reference ESMA74-1505669079-10311, Section: Trading, February 26, 2026, https://www.esma.europa.eu/document/supervisory-briefing-algorithmic-trading-eu

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