September 9, 2013
During my time at the Commodity Futures Trading Commission (“Commission”), I have consistently emphasized that the Commission must have a strong understanding of today’s highly automated and interconnected trading environments in order to oversee its markets effectively. As head of the Commission’s Technology Advisory Committee (“TAC”), I have committed considerable TAC time and resources to strengthening our understanding of automated markets. I am grateful for all the hard work of the TAC members as well as the efforts of the members of the Subcommittee on Data Standardization and the Subcommittee on Automated and High Frequency Trading, who have devoted hours of work on issues related to automated trading systems and pre-trade functionality. I hope that this Concept Release, and in particular the public comments the Commission receives in response, will build on this work.
The Concept Release asks over a hundred questions, which is appropriate given the importance of hearing from all sectors of the industry and benefiting from their knowledge and views of automated trading. I would like to highlight a few questions that I believe it would be particularly constructive to receive feedback from the public on. The first is to establish what current protections are in the market today and the extent to which the technology is deployed, as well as its effectiveness. The second is an overarching question: whether there is a need for regulatory action with regard to any of the measures currently in the market. In other words, should the Commission federalize any current industry practices/standards? Third, it would be helpful to receive public feedback on the definitions for high-frequency trading and automated trading systems that the TAC, after extensive effort by its Subcommittee on Automated and High Frequency Trading, has proposed. Finally, it would be beneficial to receive feedback on the possibility of a registration requirement for firms operating automated trading systems and not otherwise registered with the Commission. The Concept Release cites the definition of “floor broker” as the potential basis for such a requirement; I am interested to get public input on whether this, or any other provision in the Commission’s statute or regulations, can serve as a valid foundation for registration.
The Concept Release is far from perfect. For example, it could have provided a more thorough and clear cataloguing of existing industry practices and recommendations; a recent TAC reference document is more clear and concise in compiling existing standards and recommendations in the market today. Nevertheless, I support today’s issuance of the Concept Release in order to receive input from market participants on all of the issues contained herein. I look forward to reviewing the comments submitted in response to the Concept Release.
Last Updated: September 9, 2013