June 20, 2012
I would like to welcome everyone to the open meeting of the Technology Advisory Committee.
Today’s meeting is the first meeting of the newly re-chartered Technology Advisory Committee (“TAC”), which in the spirit of industry convention, I have dubbed “TAC 2.0.” In reflecting upon the first two-years as Chairman of the TAC, I am incredibly proud of what our crew of 24 was able to accomplish. We have covered such issues as pre-trade functionality and pre-trade credit checks, data collection standards, technological surveillance and compliance, the deployment of technology solutions in the swaps market, and most recently, algorithmic and high frequency trading. To put a finer point on what we have accomplished since bringing back the TAC in June 2010 with its 24 charter members, we have:
Held seven public meetings;
Established the 19-member Subcommittee on Data Standardization charged with providing recommendations based on public/private solutions for creating well-accepted standards for describing, communicating, and storing data on complex financial products;
Established the 23-member Subcommittee on Automated and High Frequency Trading charged with advising the Commission on a working definition of high frequency trading (“HFT”) in the context of automated trading strategies;
Issued Recommendations on Pre-Trade Practices for Trading Firms, Clearing Firms and Exchanges involved in Direct Market Access; and
Issued recommendations on data standardization through the use of legal entity and product identifiers.
To be sure, our open forums have informed and influenced critical policy and regulatory decisions and I believe that many of our rulemakings under the Dodd-Frank Act are better for it.
Today, we welcome sixteen new members to TAC 2.0. They bring insight and expertise from exchanges, data and technology development, design, and operational firms, buy and sell-side interests, end-users, and the public as a whole, and I know they are all eager to begin informing the Commission of the technological issues related to the massive rule implementation that we are about to embark upon.
I’d like to thank all of the original charter TAC members for their service to the Committee. Your continued commitment to the TAC throughout the first two-years of its revival despite your many other duties and obligations is remarkable, and your contributions have benefitted your industry and the public as a whole. I hope that all of you continue to participate and support the work of TAC 2.0.
Today’s discussion will cover two different topics. The morning panel will focus on presentations from our four working groups comprising the Subcommittee on Automated and High Frequency Trading. Each working group will report on their progress towards defining HFT in the context of automated trading, identifying HFT strategies, exploring oversight and surveillance of automated trading and HFT, and identifying market microstructure issues while providing a framework for open discussion within the full TAC. I’ve built in some time this afternoon to continue that discussion as needed.
This is a topic I am very interested in, especially in terms of its relative impact on the markets.
Working with our Chief Economist Andrei Kirilenko, I have tasked our four working groups to focus on four different topics related to HFT and we will hear their interim recommendations today. This is not the end of the discussion, but just the beginning. Our discussions here today will help direct future work of the working groups.
I didn't assemble this group to develop rule makings; I brought them together to help inform the thinking of the market, the public and the Commission about high frequency trading. We have assembled an expert group and they have worked hard to develop consensus on this topic. I encourage the TAC members, subcommittee members and the Commissioners to share their assessment of the work and thoughts on a path forward.
I would also like to recognize the hard work of the Commission staff for their leadership and collaboration in this effort: Joan Manley, George Pullen, Harold Hild, Jorge Herrada, Richard Haynes, Jeremy Cusimano, and JonMarc Buffa. I would also like to thank Andrei Kirilenko, for his contribution to both the HFT subcommittee, but also the Subcommittee on Data Standardization. Yesterday, Andrei announced his departure from the Commission to join MIT's Sloan School of Management. I am grateful for his various contributions to the Commission and for tackling head-on the important issues regarding technology in our markets.
The afternoon panel will focus on issues relating to the aggregation of liquidity across DCMs and SEFs in the post-Dodd-Frank world. Five panelists, moderated by new TAC 2.0 members Supurna Vedbrat (Blackrock) and John Lothian (John J. Lothian & Co.), will introduce their firms’ offerings for efficient execution and optimal liquidity when trading in and across SEFs, DCMs, and platform/exchange aggregators. These panelists include Tom LaSala and Michel Everaert (CME Group), Chuck Vice (ICE), Paul Hamill (UBS), Chris Ferreri (ICAP) and George Harrington (Bloomberg). After presentations, Supurna and John will open the floor for discussion.
Recognizing that the Commission has not finalized the SEF rules, firms have been developing competitive SEF offerings in anticipation of what those final rules will look like. Today’s presentations will sample a handful of some of these offerings, all of which provide a slightly different take on a SEF. I have asked Supurna and John to moderate because they are both very knowledgeable in this area and serve clients who will need to trade on and across SEFs in search of competitive pricing and liquidity for their trades.
I am excited about today’s agenda covering high frequency trading definitions and trade execution. These are two of the most dynamic elements in our markets today.
Before I turn to Andrei Kirilenko, I would like to recognize my fellow Commissioners to allow them to make opening comments.
Last Updated: June 20, 2012