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CFTC source code proposal raises grave concerns

CFTC source code proposal raises grave concerns

4 November 2016 3:45pm EDT

FIA, along with the FIA Principal Traders Group (FIA PTG), expressed grave concerns regarding a critically important provision in the CFTC’s proposed supplement to its draft rules on automated trading. The supplement, passed today by a vote of 2-1 at a CFTC public meeting, would permit an unacceptable level of access to proprietary source code used to operate automated trading systems.

“The CFTC’s regulation of automated trading must focus on safeguarding markets through appropriate risk controls. We share the CFTC's commitment to strengthening risk controls, and our members have actively supported improvements that market participants, intermediaries and exchanges can and should implement to prevent market disruption. We cannot support the proposed source code provision, however,” said Walt Lukken, president and CEO of FIA.

“We’re very disappointed that the Commission ignored the view expressed by a wide range of market participants as well as technology companies outside this industry that access to source code should require a subpoena,” Lukken added. “Source code deserves the same protections under the law as any other form of intellectual property. The proposed special call process simply does not meet that standard.”

A subpoena is enforced and administered through the federal courts, which provides protection against the abuse of power, enables firms to petition a neutral third party decision-making body, and ensures that legal concerns beyond CFTC’s enforcement remit are given full and appropriate consideration.

FIA and FIA PTG will be submitting formal feedback to the CFTC during the supplement’s public comment period. The two associations have submitted multiple comment letters to the CFTC on the proposed rules at earlier stages of the rule-making process (March 2016, June 2016, June 2016). The associations also have done extensive work on developing best practices for mitigating risk in automated trading, and have testified before Congress on this issue.

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About FIA
FIA is the leading global trade organization for the futures, options and centrally cleared derivatives markets, with offices in London, Singapore and Washington, D.C. FIA’s membership includes clearing firms, exchanges, clearinghouses, trading firms and commodities specialists from more than 48 countries as well as technology vendors, lawyers and other professionals serving the industry. FIA’s mission is to support open, transparent and competitive markets, protect and enhance the integrity of the financial system, and promote high standards of professional conduct. As the principal members of derivatives clearinghouses worldwide, FIA’s member firms play a critical role in the reduction of systemic risk in global financial markets.

For more information, contact Will Acworth at +1 202-466-5460.

 

About FIA PTG

FIA PTG is an association of more than 20 firms that trade their own capital on exchanges in futures, options and equities markets worldwide. FIA PTG members engage in manual, automated, and hybrid methods of trading, and they are active in a wide variety of asset classes, including equities, fixed income, foreign exchange and commodities. FIA PTG member firms serve as a critical source of liquidity, allowing those who use the markets, including individual investors, to manage their risks and invest effectively. FIA PTG advocates for open access to markets, transparency, and data-driven policy.

For more information, contact Will Acworth at +1 202-466-5460.

 

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