UK FMSB published a Statement of good practice (SoGP) for the application of a model risk management framework to electronic trading algorithms and invites comments.
SoGP
Purpose is to support firms in applying model risk management frameworks in a proportionate manner to models deployed in electronic trading algorithms (Algos).
Takes into account the nature, scale, complexity of models and existing systems and risk controls intended to mitigate associated market, conduct, credit, operational risks.
Addresses a sub-set of issues associated with model risk management; not intended to detail a comprehensive model risk management framework or to address all risk types.
Areas focused on are where market practitioners, including first line risk owners and second line risk managers, have identified that the nature of model use in electronic trading algorithms merits a differentiated approach compared with other model types.
Comments invited on how the wholesale markets industry can apply existing model risk management frameworks in a proportionate way to electronic trading algorithms.
Effectiveness
UK FMSB invite comments on the transparency draft by Sep. 22, 2023.
Apr. 22, 2024 Final Statement
On Apr. 22, 2024, UK FMSB issued final Statement of good practice (SoGP) for the application of a model risk management framework to electronic trading algorithms.
Aims to supplement existing broader supervisory guidance, is effective May 17, 2024.
