CFTC Chief Massad Sees Validity in Tempered Regulations of Automated Trading

Mr. Massad took new aim at automated trading, including rolling back a segments of a multi-tiered proposal for regulation.

The regulatory atmosphere in the United States has already become a hot topic issue heading into November with the upcoming US Election. Donald Trump has stumped repeatedly as a force who is not only open to, but firmly entrenched on undoing a number of financial regulations put in place since the passage of Dodd-Frank.

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Conversely, his opponent, Hillary Clinton, has been less than enthused by rolling back years of regulations, which have been seen by many as stifling, and in some cases outwardly oppressive towards a number of financial institutions and brokers. However, the discussion seems to be gaining an unlikely player in an ongoing struggle on how to police US financial markets, as Timothy Massad, the acting Chair of the US’ Commodities and Futures Trading Commission (CFTC) lent his perspective.

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Massad has also been a strong proponent for financial regulation. Since stepping into the role back in 2014, he has overseen a number of ongoing actions and directives for the US regulator that has largely facilitated the current direction towards an even tighter regulatory climate.

The man previously oversaw the Troubled Asset Relief Program (TARP), a principal US governmental response to the 2008 financial crisis designed to help stabilize the economy and provide help to homeowners. Under this unit, the US Treasury’s investments in financial institutions, the credit markets and the auto industry prevented the economy from falling into an even larger depression.

Garnering these sorts of credentials, Mr. Massad took new aim at a channel of trading that has gotten a lot of attention in recent years – automated trading. In doing so he floated the idea of a narrowing of rules that would govern automated trading. While he did feel that automated trading did warrant adding regulations, he also recognized that some industry concerns regarding the overall latitude of regulations was in fact valid.

In particular, Mr. Massad endorsed limiting the oversight to just two levels, not a previous three as was originally proposed. According to Mr. Massad in a recent conference in New York sponsored by the New York Federal Reserve, “I would support requiring risk controls at the exchange level, and either the trader or FCM level. A trading firm could have its own controls or opt in to the FCM controls.”

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