Automated trading has become the default mode of execution in modern electronic markets. In major equity markets, approximately 60–75% of trading volume is executed algorithmically rather than by human traders, with some estimates putting the figure even higher in U.S. equities. Algorithms shape liquidity formation, execution quality and price discovery across asset classes and venues. But as strategies have grown more sophisticated and markets more fragmented, the risks created by weak governance, insufficient testing and inadequate oversight are costly to ignore.
This gap was exposed last fall, when the UK Financial Conduct Authority (FCA) published a multi-firm review examining how principal trading firms are meeting their obligations under MiFID II’s Regulatory Technical Standard 6 (RTS 6), which sets requirements for the testing, deployment and monitoring of trading algorithms. In the review, published more than five years after the regime was introduced, the regulator found that many firms still fall short – and the stakes are only rising.
The Surveillance Gap Comes into Focus
The FCA identified persistent weaknesses in how firms govern their algorithmic trading programs, including unclear accountability, outdated policies and inconsistent implementation of risk controls. Surveillance was a major area of concern. The regulator found that responsibility for pre- and post-trade controls was not always clearly owned or well understood among business, risk and compliance teams.
More critically, the review found that many employees tasked with identifying market abuse struggle to keep pace with the scale and speed of trading activity. Alert backlogs, slow investigation times and poorly calibrated detection logic all point to a common culprit: control infrastructures that were not designed for markets dominated by automation. Even where firms have invested in more robust development and testing regimes, those efforts are undermined without independent, high-performance monitoring of how algorithms behave once deployed in live markets.
Ultimately, the FCA’s conclusion was clear and hard to dispute: despite years of regulatory focus, the industry is not as far along in operationalizing robust algorithmic controls as it should be.
Insufficient Oversight for Complex Markets
If these gaps are concerning in today’s markets, they will soon become even more problematic given the trajectory of market structure and technology. Firms are increasingly operating across equities, options, futures, FX, fixed income and digital assets. New market structures – including 24/7 trading environments, fractional shares and emerging arenas such as prediction markets – are introducing new behaviors, new participants and new forms of liquidity.
Today, many firms are adapting their existing strategies to these new environments. Algorithms that were originally designed for one market are now being deployed in very different conditions, often interacting with a far more diverse and dynamic ecosystem. That means they can behave unpredictably. Even when a firm thinks it understands exactly how its algos will function, that behavior might change in a new trading environment. In highly automated markets, one algorithm can interact with another in ways that amplify price movements – sometimes dramatically. What appears orderly in isolation can quickly become disorderly in practice.
This is why governance, testing and – critically – real-time surveillance are essential operational controls. Without independent, high-performance monitoring of live trading behavior, firms do not have a reliable way to answer a basic question: what are our algorithms actually doing in the market right now?
Full Control in the Age of Algorithmic Trading
Eventus’ Validus platform is designed to close this gap. Our algo monitoring technology is used by market participants globally to manage and reduce risk, increase transparency and meet regulatory obligations under MiFID II RTS 6, as well as the UK and EU Market Abuse Regulation (MAR) and U.S. requirements like SEC Rule 15c3-5.
Rather than treating surveillance purely as a post-hoc control, Validus provides real-time, high-performance monitoring that generates alerts within seconds of relevant events – even in extremely high-throughput environments. Validus real time processing enables firms to detect patterns of disorderly trading, feedback loops and potential market abuse as they emerge, immediately after the damage is done and before it can proceed further.
Just as importantly, Validus can be tailored to how firms trade. Out-of-the-box procedures for common abusive behaviors can be calibrated based on firm-specific strategies, asset exposures and risk profiles. The same framework can be used both in production and in UAT environments, giving market participants a consistent control layer for supervising new algorithms and strategy updates before and after deployment.
The result: firms can move beyond simply asserting that their algorithms behave as intended. They gain the ability to continuously verify algorithmic behavior, across asset classes, venues and market conditions – and to respond quickly when reality diverges from design.
The FCA’s RTS 6 review should serve as a reminder that, in markets increasingly driven by automation, algo monitoring must be treated as part of the core trading control stack, not as after-the-fact review. When oversight lags behind execution, risk has time to propagate. Firms that invest in governance, testing and real-time monitoring as core components of their trading architecture will be better positioned to manage algo risk, satisfy regulators and operate confidently as automation continues to accelerate.
Contact the Eventus team to see how Validus’ algo trading controls help firms detect, understand and respond to risk and abuse in real time.