The CFTC issued a Concept Release on Risk Controls and System Safeguards for Automated Trading Environments to provide an overview of the automated trading environment, including its principal actors, potential risks, and responsive measures taken by the CFTC or industry participants. The Concept Release also discusses a series of (i) pre-trade risk controls; (ii) post-trade reports and other measures; (iii) system safeguards related to the design, testing, and supervision of automated trading systems; and (iv) additional protections designed to promote safe and orderly markets.
Lofchie Comment: This Concept Release begins with the statement that the “U.S. derivatives markets have experienced a fundamental transition from human-centered trading venues to highly automated and interconnected trading environments.” This much is positive in that it seems at least to promise that the regulators will engage with today’s existing markets rather than engaging in an exercise of recalling how well the markets supposedly functioned some decades ago. That said, one is often left with the feeling that the regulators view market participants as enemies of the market, with Commissioner Chilton in his remarks taking the opportunity to repeat his urging that Congress multiply the CFTC’s sanctioning authority by about 70 times (from $140,000 a day to $10,000,000).
It is also notable that Commissioner O’Malia concurred in the issuance of the release, but indicated that the questions he had wished to be included in the release were not. It is unfortunate that his questions were not included in the release, particularly given that he has played a very active role in technology issues.
Click here for Delta Strategy Group’s Summary on the CFTC Concept Release.
See: CFTC Concept Release.
See also: Chairmen Gary Gensler’s Statement of Support Regarding Concept Release; Commissioner Chilton’s Statement of Concurrence; Commissioner O’Malia’s Statement of Concurrence.