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Related areas
ESMA supervisory briefing on algorithmic trading under MiFID II
ESMA published a supervisory briefing on algorithmic trading under MiFID II. The briefing is non-binding but sets out ESMA's expectations on governance, testing, outsourcing, and pre-trade controls.
ESMA takes a broad view of what constitutes algorithmic trading. Any trading where a computer algorithm determines individual parameters of an order, such as timing, price, quantity, or whether to initiate the order, falls within scope, even where a human approves or authorises the order before submission. Activities such as portfolio rebalancing based on pre-defined rules, execution strategy selection, and risk management adjustments driven by automated logic may all qualify.
ESMA emphasises that investment firms remain “fully and solely responsible” for compliance with MiFID II and RTS 6 where they use third‑party algorithms or outsource software or hardware used in algorithmic trading activities. Outsourcing or reliance on external technology providers “will not alter the firm’s regulatory obligations.” Firms must retain “adequate understanding, oversight, and control” over the algorithms they use and must ensure that contractual arrangements provide sufficient access to information and allow them to demonstrate compliance to their competent authority.
ESMA flags that where an algorithmic trading system meets the definition of an "AI system" under the AI Act, additional AI Act requirements may apply. The governance arrangements required under RTS 6 must integrate the AI Act requirements.
While AI-based algorithmic trading is currently excluded from the high-risk category under the AI Act, this is subject to annual review. AI systems that interact directly with natural persons may still trigger transparency obligations under Article 50 of the AI Act. Firms should also ensure that compliance staff can adequately explain how AI impacts their algorithms' decision-making.
ESMA expects firms to conduct a structured annual self-assessment of their algorithmic trading systems on an article-by-article basis under RTS 6, approved by senior management and subject to internal audit review where applicable.
EMIR 3 RTS amending clearing thresholds
The European Securities and Markets Authority (ESMA) has published its Final Report with draft regulatory technical standards (RTS) setting out proposed amendments to the EMIR clearing thresholds framework. These amendments give effect to the changes introduced under EMIR 3.
Under the new approach, financial counterparties (FC) which includes UCITS funds and AIFs, will be required to assess their positions against two separate thresholds. First, they must calculate their positions in uncleared OTC derivative contracts and compare them against the new uncleared clearing thresholds. Second, they are required to calculate their aggregate positions (including both cleared and uncleared OTC derivatives) and compare them to the aggregate thresholds. If the result of either calculation exceeds one of the relevant thresholds, the FC will be categorised as a FC+. As is currently the case, if the FC does not perform the calculation, it will automatically be considered as an FC+.
Aggregate thresholds will now apply only to asset classes currently subject to the mandatory clearing obligation, namely, interest rate and credit derivatives. As a result, aggregate clearing thresholds will no longer apply for OTC equity derivatives, OTC foreign exchange derivatives, and OTC commodity derivatives.
Clearing thresholds (existing and EMIR 3)
Asset class |
Existing EMIR thresholds (gross notional value) |
EMIR 3 uncleared thresholds (FCs & NFCs) |
EMIR 3 aggregate cleared and uncleared thresholds (FCs) |
|---|---|---|---|
Credit derivatives |
€1bn |
€0.8bn |
€1bn |
Interest rate derivatives |
€3bn |
€2.2bn |
€3bn |
Equity derivatives |
€1bn |
€0.7bn |
N/A |
Foreign exchange derivatives |
€3bn |
€3bn |
N/A |
Commodity & other OTC derivatives |
€4bn |
€4bn for commodity & emission allowance derivatives |
N/A |
Next steps
The proposed RTS have been submitted to the European Commission for adoption. The Commission shall decide whether to endorse the proposed amendments within three months. The RTS will enter into force on the twentieth day following publication in the Official Journal of the European Union.
ESMA has clarified that counterparties may continue using their usual annual calculation cycle, which is typically in June, when applying the new methodology, unless they choose to transition earlier.
ESMA 2025 report on costs and performance of EU retail products
ESMA published its 2025 market report on the costs and performance of EU retail investment products providing an overview of key developments up to the end of 2024.
ESMA’s analysis covers UCITS, retail AIFs and structured retail products, and this year additionally includes new analyses of active ETFs and European Long-Term Investment Funds (ELTIFs).
UCITS
UCITS ongoing costs in the EU continued to decline in 2024, especially for bond funds. For the one-year investment horizon, between 2020 and 2024 the ongoing costs of retail equity funds (ETFs excluded) declined by 8%, while the ongoing costs of retail bond funds (ETFs excluded) fell by almost 15%. The reduction is partially driven by new investment funds that tend to have lower ongoing costs, on average. The drop in costs for incumbent funds i.e. share classes already offered in the preceding five years is clearly lower, at the one-year investment horizon the decrease was 3% for equity funds and 9% for bond funds.
Ongoing costs of ETFs decreased by 13% and 17% respectively for equity and bond funds. Active ETFs report slightly higher costs than passive ETFs but lower costs than active funds.
Gross returns improved in 2024, and real net returns were positive, contrary to 2023. A hypothetical five-year investment of €10,000 between 2020 and 2024, based on a stylised portfolio of UCITS, would yield around €12,200 net of ongoing costs, but slightly below €10,000 when considering the effect of inflation. Equity active funds underperformed in 2024 passive non-ETF funds and ETFs.
As in 2023, the ongoing costs of environmental, social and governance (ESG) funds are lower compared to non-ESG equivalents. ESG funds underperformed their non-ESG equivalents in 2024. Similarly, SFDR Article 9 funds underperformed funds disclosing under SFDR Article 6.
Retail AIFs
AIFs reached almost €8tn in assets in 2024, of which just above €700bn was estimated to be held by retail investors (retail AIFs). The share of retail investors decreased for the second consecutive year to 9% in 2024 compared to almost 14% in 2022. Around a quarter of the total retail investment in AIFs is concentrated in funds primarily focusing on traditional asset classes, such as equities and bonds. Annualised returns of AIFs offered to retail investors significantly improved from 2023 to 2024 for funds-of-funds, while other AIFs and the rest of the market reported similar returns for the two years.
Real estate funds reported slightly declining gross and net performances. A hypothetical five-year investment of €10,000 between 2020 and 2024, based on a stylised portfolio of AIFs, would yield around €11,700, net of fees, or €9,500 when considering the effect of inflation.
The creation of new European long-term investment funds (ELTIFs) surged recently, with 62% of them being launched in 2024 or 2025. ELTIFs classified as private equity reported the stronger returns in 2024 (10%).
ESMA takeaways from the 2025 call for evidence on the retail investor journey.
ESMA has published its key findings from the 2025 call for evidence on the retail investor journey and outlined follow up actions intended to make it easier for retail investors to access suitable investment opportunities. Although the call for evidence focuses mainly on MiFID distribution, it signals emerging supervisory and policy priorities relevant to firms engaging with retail clients.
ESMA’s priority areas
Consumer testing will guide the improvements to disclosures and digital investor journeys, including mobile-first investors.
Key stakeholder feedback
Next steps
ESMA will use the feedback to inform future technical advice on MiFID II delegated acts and potential updates to its guidelines, aligned with the final legislative outcome of the Retail Investment Strategy (RIS).
ESMA TRV Risk Monitor 1/2026
ESMA has published its TRV Risk Monitor 1/2026, outlining the key risks and vulnerabilities in EU financial markets. ESMA finds that risks of market and systemic stress remain high despite resilient market performance in the second half of 2025.
Fund related sections include:
Press release: EU financial markets enter 2026 amid high-risk environment.
ESMA guidelines on stress test scenarios under the MMF Regulation
On 26 March 2026, ESMA published the official translations, including the English version, of its 2025 guidelines on stress test scenarios under Article 28 of the Money Market Funds Regulation (MMF Regulation). The parts of the guidelines shown in red text will apply from 26 May 2026, with the other parts already applying from the dates specified in Articles 44 and 47 of the MMF Regulation.
For more information on these topics please contact any member of A&L Goodbody's Asset Management & Investment Funds team.
Date published: 31 March 2026