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CFTC Adopts Comprehensive Automated Trading Rules

by Irina Slav
  • The Commodity Futures Trading Commission targets high-frequency traders, wants more transparency
CFTC Adopts Comprehensive Automated Trading Rules
Bloomberg
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The Commodity Futures Trading Commission (CFTC) has approved a comprehensive suite of regulatory measures aimed at tackling the risks associated with automated trading.

The Commission said in a statement that the rules, dubbed Regulation Automated Trading (AT), comprise of risk controls and transparency requirements to be applied on US designated contract markets.

High-frequency Trading on the Line

The scope of the new rules covers traders using algorithmic trading platforms, Clearing member futures commission merchants when they act in respect to the above-mentioned group of traders, and designated contract markets, when executing algorithmic traders’ order. Algorithmic trading accounts for 70 percent of all market activity in the US.

Among the measures stipulated in Regulation AT are limiting parameters for maximum order message and maximum order size, along with reporting requirements, both for traders and clearing member futures commission merchants, regarding their risk controls. In addition, Regulation AT envisages the implementation of standards for the development, testing, and monitoring of algorithmic trading systems.

One other requirement laid down in the new regulation is the registration of some proprietary traders who are not registered with the CFTC but at the same time conduct high-frequency trades in certain key futures. These are the proprietary traders who will conduct trades via direct electronic access to designated contract markets.

The Commodity Futures Trading Commission (CFTC) has approved a comprehensive suite of regulatory measures aimed at tackling the risks associated with automated trading.

The Commission said in a statement that the rules, dubbed Regulation Automated Trading (AT), comprise of risk controls and transparency requirements to be applied on US designated contract markets.

High-frequency Trading on the Line

The scope of the new rules covers traders using algorithmic trading platforms, Clearing member futures commission merchants when they act in respect to the above-mentioned group of traders, and designated contract markets, when executing algorithmic traders’ order. Algorithmic trading accounts for 70 percent of all market activity in the US.

Among the measures stipulated in Regulation AT are limiting parameters for maximum order message and maximum order size, along with reporting requirements, both for traders and clearing member futures commission merchants, regarding their risk controls. In addition, Regulation AT envisages the implementation of standards for the development, testing, and monitoring of algorithmic trading systems.

One other requirement laid down in the new regulation is the registration of some proprietary traders who are not registered with the CFTC but at the same time conduct high-frequency trades in certain key futures. These are the proprietary traders who will conduct trades via direct electronic access to designated contract markets.

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