Glossary & sources.

Glossary

Agent (LLM agent)

A large language model plus a bounded set of tools it can call, orchestrated to complete a task. In this reference, agents recommend and analyse; they do not execute orders directly.

Backtesting

Simulating a strategy against historical market data to estimate its behaviour. Only meaningful when it models transaction costs, slippage, look-ahead constraints and survivorship bias.

CIO agent

The Chief Investment Officer agent that coordinates research, resolves conflicts and writes the formal trade proposal. Does not override hard risk controls.

Client Portal Web API (IBKR)

Interactive Brokers’ REST + WebSocket API surface. Session-based with a /tickle keepalive; being consolidated with Digital Account Management under a unified Web API using OAuth 2.0.

Consumer Duty (UK)

FCA Principle 12 (PRIN 2A / PS22/9) obligating authorised firms to deliver good outcomes for retail customers on target market, price and value, understanding and support.

Contextual retrieval

Anthropic’s retrieval-augmented generation pattern that prepends chunk-specific context before embedding, combines with BM25 and reranks. Reduces retrieval errors by around 49% on the SEC-filings worked example.

DEA (Direct Electronic Access)

Client-facing access to a trading venue through a broker’s membership. Additional obligations under MiFID II Article 17(5) and RTS 6 Articles 19-23.

Digital Omnibus (EU)

Political agreement of 7 May 2026 that would defer the AI Act Annex III high-risk obligations from 2 August 2026 to 2 December 2027. Not yet formally adopted.

DORA

Regulation (EU) 2022/2554 on digital operational resilience for financial entities. Applies from 17 January 2025. Five pillars including ICT risk management, incident reporting and third-party risk.

Drawdown

Peak-to-trough decline in portfolio value. The most-monitored risk metric alongside daily loss and volatility.

FinanceBench

Patronus AI open-book QA benchmark over 10-K / 10-Q filings. Frontier models still miss 20-40%.

Formal trade proposal

The structured record that flows through the controlled decision workflow. Contains instrument, action, thesis, evidence, invalidation condition, exit plan, portfolio impact, residual risks, confidence, data timestamp and approvals.

Hallucination

An LLM output that is fluent but factually wrong. Documented at scale in FailSafeQA (arXiv 2502.06329) and FAITH (arXiv 2508.05201).

HFT (high-frequency trading)

Under Delegated Regulation 2017/565 Article 19, at least 2 messages per second per instrument or at least 4 across all instruments. Crosses out of the MiFID II Article 2(1)(d) own-account exemption.

Kill switch

An operational control that halts all trading when triggering conditions are met (broker reconciliation break, stale data, duplicate orders, breached limits, unverified policy version, unreliable clocks or audit).

LangGraph

MIT-licensed graph and state-machine agent framework by LangChain. Checkpointing, durable state, human-in-the-loop, time-travel replay. Suited to compliance-heavy trading pipelines.

Look-ahead bias

Any use of information in a backtest that would not have been available at the decision time. For LLMs, the special case where pretraining data post-dates the backtest window.

MAR (Market Abuse Regulation)

Regulation (EU) 596/2014, retained in UK law post-Brexit. Article 20 governs investment recommendations; Delegated Regulation 2016/958 operationalises identity, objectivity and conflict-of-interest disclosure.

MAR 7A (FCA)

The FCA Handbook module on algorithmic trading systems and controls. Applies to authorised MiFID firms trading on UK venues.

MCP (Model Context Protocol)

Open protocol for exposing tools and data sources to LLM agents. De-facto interoperability standard in 2026.

MiFID II Article 17

Directive 2014/65/EU governance requirements for investment firms engaged in algorithmic trading. Operationalised in RTS 6 (Delegated Regulation 2017/589).

Non-Display Use (market data)

Category in exchange market-data licensing covering any use of the data other than direct human display — including LLM training and inference. Requires explicit licences from LSEG, NYSE, Nasdaq, Deutsche Börse and Bloomberg as of 2024-2025.

PERG 8.28

FCA Perimeter Guidance passage stating that software services generating specific buy, sell or hold signals are liable to be advice for the purposes of RAO Article 53(1).

Red-team agent

An agent whose sole role is to attempt to disprove every proposed trade — searching for contradictory data, stale assumptions, crowded positioning and unrecognised event risk.

Risk engine (deterministic)

The component that applies version-controlled risk policies to any proposed order. Approves, reduces or vetoes. Cannot be overridden by a language model.

RTS 6

Delegated Regulation 2017/589 implementing MiFID II Article 17: governance, testing and conformance, kill functionality, pre-trade controls, annual self-assessment.

Separation of powers

Design principle that no single agent may research, size, approve and execute the same trade. Research, control, risk and execution functions are structurally separated.

SIP (Securities Information Processor)

Consolidated tape for US equities. Alpaca’s Algo Trader Plus plan gives full CTA + UTP SIP real-time; the free tier is IEX-only.

TradingAgents (arXiv 2412.20138)

Reference open-source implementation of the multi-agent trading pattern in LangGraph. Architecture worth adopting; reported P&L numbers do not survive out-of-sample reproduction.

TWS API (Interactive Brokers)

Socket API listening on ports 7496 / 7497 (TWS) or 4001 / 4002 (IB Gateway). Full historical bar surface and low-latency capable. Most builders pair with ib_async.

Universe (investment)

The permitted set of instruments a strategy may consider. Set by the CIO agent alongside exchange, sector, liquidity and holding-period constraints.

Walk-forward optimisation

Backtesting method that refits parameters on rolling in-sample windows and evaluates each subsequent out-of-sample window. Standard defence against over-fitting.

Sources cited across this reference

Regulatory — UK

• FCA Handbook — MAR 7A (Algorithmic trading systems and controls).
• FCA Handbook — PERG 2, 8, 13 (Perimeter Guidance).
• FCA Handbook — PRIN 2A (Consumer Duty), SYSC 15A (Operational resilience).
• FSMA 2000 sections 19, 21, 22, 55A. RAO 2001 Articles 25, 37, 53.
• PS22/9 Consumer Duty. PS22/10 High-Risk Investments. PS23/6 Cryptoasset promotions. PS23/13 Financial promotion approvers. PS25/22 Targeted Support.
• FCA Multi-firm review of algorithmic trading controls (22 August 2025).
• FCA AI Update (April 2024); DP5/22; FS2/23.
• BoE FPC Financial Stability in Focus, April 2025.

Regulatory — US

• Investment Advisers Act 1940 sections 202, 203, 203A; Rules 203A-1, 204-3, 206(4)-1, 206(4)-2.
• SEC Rule 15c3-5 (Market access rule).
• SEC Release IA-1092 (Applicability of Investment Advisers Act to persons giving investment advice).
• SEC Release 33-11377 (12 June 2025) withdrawing Predictive Data Analytics proposal.
• Regulation S-P amendments, SEC Release 34-100155 (May 2024).
• FINRA Rules 3110, 3120, 1220(b)(4); Regulatory Notices 15-09, 16-21, 24-09.
• CFTC Reg AT withdrawal (FR 2020-14383); Electronic Trading Risk Principles (86 FR 2048).
• Lowe v. SEC, 472 U.S. 181 (1985).

Regulatory — EU

• MiFID II Directive 2014/65/EU (Articles 2, 4, 5, 17, 24).
• Delegated Regulation 2017/565 (Articles 9, 19).
• Delegated Regulation 2017/589 (RTS 6).
• MAR Regulation 596/2014 (Articles 3, 7, 8, 12, 20).
• Delegated Regulation 2016/958 (Investment recommendations).
• EU AI Act Regulation 2024/1689.
• DORA Regulation (EU) 2022/2554.
• ESMA35-335435667-5924 (May 2024); ESMA74-1505669079-10311 (February 2026 Supervisory Briefing on Algorithmic Trading); ESMA35-43-3861 (July 2023).

Academic & technical

• Islam et al., FinanceBench (arXiv 2311.11944).
• Chen et al., FinQA (arXiv 2109.00122); ConvFinQA (arXiv 2210.03849).
• FailSafeQA (arXiv 2502.06329); FAITH (arXiv 2508.05201).
• Wu et al., BloombergGPT (arXiv 2303.17564).
• Xiao et al., TradingAgents (arXiv 2412.20138); FinRobot (arXiv 2405.14767).
• LiveTradeBench (arXiv 2511.03628); Profit Mirage (arXiv 2510.07920).
• Lopez-Lira & Tang (arXiv 2304.07619); Kirtac & Germano (arXiv 2412.19245); Cao et al. (arXiv 2510.03195).
• BlackRock LoRA news embeddings (arXiv 2407.18103); JPMorgan DocLLM (arXiv 2401.00908).
• Glasserman & Lin (SSRN 4586726; arXiv 2309.17322); Sarkar & Vafa (SSRN 4754678).
• Anthropic contextual retrieval (anthropic.com/engineering/contextual-retrieval).

Broker & data documentation

• Interactive Brokers TWS API (interactivebrokers.github.io/tws-api/); Client Portal Web API (interactivebrokers.github.io/cpwebapi/).
• Alpaca REST (alpaca.markets/docs); alpaca-py SDK.
• Schwab Individual Trader API (developer.schwab.com); schwab-py.
• E*TRADE developer portal (developer.etrade.com); pyetrade.
• Trading 212 Public API (docs.trading212.com/api); Saxo OpenAPI (developer.saxo).
• Public.com Trading API (public.com/api/docs); Tradier (docs.tradier.com); Tastytrade (developer.tastytrade.com).

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