PTCs are used by investment firms to carry out checks at order entry to limit and prevent sending erroneous orders for execution to trading venues. Following the May 2022 flash crash, ESMA and NCAs have focussed their attention on the implementation of PTCs in the EU, gathering evidence through questionnaires submitted to a sample of EU investment firms. As a follow up, ESMA and NCAs have decided to launch a CSA with the goal of gathering further and more detailed insights on how firms are using PTCs across the EU. 

The CSA will cover the following aspects:

• Implementation of PTCs, including their calibration methodology and the use of hard and soft blocks in the design of PTCs; 
• Establishment of credit and risk limits and their interaction with PTCs;
• Monitoring and governance framework related to PTCs; 
• Implementation and monitoring of PTCs in case of outsourcing of trading activity to third countries. 

This initiative and the related sharing of practices across NCAs aim at ensuring consistent application of EU rules, helping to promote stable and orderly markets in line with ESMA’s objectives. The rules governing the use of PTCs are set out in MiFID II and more specifically in CDR 2017/589 (RTS 6) which specifies the organisational requirements of investment firms engaged in algorithmic trading.