Purpose The purpose of this paper is to examine the effectiveness of two regulatory initiatives in developing awareness of conduct risk associated with algorithmic and direct-electronic access (DEA) trading at broker-dealers: the UK Financial Conduct Authority’s algorithmic trading compliance in the wholesale markets and Commission Delegated Regulation 2017/589 (CDR 589) to the second Markets in Financial Instruments Directive. Design/methodology/approach A qualitative examination of 15 semi-structured interviews with representatives of London Metal Exchange member firms, their clients and regulators. Findings This paper finds that the key conduct related messages in algorithmic trading compliance in the wholesale markets may not yet be fully embedded at broker–dealers. This is because of a perceived simplicity of the algorithms deployed by broker dealers or, alternatively, a lack of reflection on their impact. Conversely, a concern exists that clients’ deployment of algorithms on DEA channels provided by broker–dealers increase conduct risk. However, the threat of harm posed by clients is not envisaged in current definitions of conduct risk. Accordingly, CDR 2017/589 does not currently require firms to evaluate clients’ awareness of it. Research limitations/implications This study’s findings are limited to the insights provided by 15 participants. Originality/value This paper contributes to existing research by deepening understanding of conduct risk arising from algorithmic trading and DEA. To account for the potential harm arising from clients’ activities, this paper proposes a revision to Miles’s definition of conduct risk. This is complemented by a proposed amendment to CDR 2017/589 to require evaluation of clients’ understanding of conduct risk.

Purpose The purpose of this paper is to examine the effectiveness of UK investment firms’ implementation of the requirements in Commission Delegated Regulation 2017/589 (more commonly known as “Regulatory Technical Standard 6” or “RTS 6”) that govern the conduct of algorithmic trading activities. Design/methodology/approach A qualitative examination of 19 semi-structured interviews with practitioners working for, or with, UK investment firms engaged in algorithmic trading activities. Findings The paper finds that practitioners generally have a good understanding of the requirements in RTS 6. Some lack knowledge of algorithms, coding and algorithmic strategies but have used best efforts to implement RTS 6. However, regulatory fatigue, complacency, cost pressures, governance in international groups, overreliance on external knowledge and generous risk parameter calibration threaten to undermine these efforts. Research limitations/implications The study’s findings are limited to the participants’ insights. Some areas of the RTS 6 regime attracted little comment from participants. Practical implications The paper proposes the introduction of mandatory algorithmic trading qualification requirements for key staff; the lessening of the requirements in RTS 6 for automated executors; and the introduction of a recognised software vendor regime to reduce duplication and improve coordination between market participants that deploy algorithmic trading systems. Originality/value To the best of the author’s knowledge, the study represents the first qualitative examination of firms’ implementation of the algorithmic trading regime in the second Markets in Financial Instruments Directive 2014/65/EU.