High frequency traders must be authorized by BaFin, including traders admitted to a trading venue as trading participants, as well as firms to which trading participants grant electronic access to the trading venue. However, pursuant to the EU passport under the Markets in Financial Instruments Directive (MiFID), securities firms domiciled in another EU state with state approval for trading on their own accounts would not need additional authorization in Germany.
Under the draft, asset management companies, investment services enterprises and investment stock companies engaged in algorithmic trading must structure their trading systems so that they do not disrupt the market. Specifically, firms engaged in algorithmic trading must ensure that their trading systems are resilient, have sufficient capacity and are subject to appropriate trading limits. Algorithmic trading is defined as trading in financial instruments for which a computer algorithm automatically determines the specific order parameters, such as a decision to initiate an order, its timing, price and quality.