In two sets of remarks this week, CFTC Chairman Tim Massad said that the Commission will likely release its proposed rules on automated trading in November. Chairman Massad indicated the rules will build on industry best practices and will likely include a focus on pre-trade risk controls.
The rules aren’t yet final, but it’s encouraging that the CFTC is taking a principles-based approach to drafting them, which FIA, with input from FIA PTG and other market participants has emphasized in their recommendations on this subject. And it’s noteworthy that Chairman Massad said that the CFTC’s requirements “will apply regardless of whether the automated trading is high or low frequency. We will not attempt to define high-frequency trading specifically.” That’s important, because automated trading is used across the market by a wide variety of participants. Regulations that only touch on certain aspects of automated trading would not comprehensively address its risks. We believe that all users of automated trading tools have a responsibility to implement pre-trade risk controls appropriate to their role in the market, whether initiating the trade, routing the trade, executing the trade, or clearing the trade.
We’re looking forward to reviewing the final proposals when they’re released, and we’ll continue to advocate for a principles-based, data-driven approach to analyzing market structure. We’re committed to working with the Commission to ensure we maintain effective risk controls and competitive, healthy, high-quality markets.
