Proposed regulation contains a definition of “Algorithmic Trading” which is broad
By Carl Gilmore, founder and president of Integritas
The US Commodity Futures Trading
Commission (CFTC) recently proposed a series of measures
pertaining to risk management, market access, transparency and
other safeguards intended to enhance regulations surrounding
automated trading and the use of algorithms. The proposed
new regulation known as "Regulation Automated
Trading", and referred to as Reg AT by the futures
industry, may have profound effects on futures trading in the
US and has generated a lot of attention and industry
consternation. Several components of the proposed
regulation raise concerns. I’ve highlighted a
Trading – The
proposed regulation contains a definition of "Algorithmic
Trading" which is quite broad. The proposal defines
algorithmic trading as any trading on a Designated Contract
Market (DCM) in which a person uses one or more computers or
algorithms to determine whether to initiate, modify or cancel
an order, or otherwise make a determination as to any of the
other components of an order including the venue, type of
order, timing, sequencing, quantity, or management of the order
post submission. The proposed definition goes on to state
that the proposed regulation does not include orders that are
transmitted electronically to a DCM where each and every
attribute of such order is manually entered into a front-end
system by a natural person.
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