Reg AT is designed to regulate more closely the murky world of electronic trading but its practitioners are wary of the plan
The clearest message from respondents to
the consultation on Regulation Automated Trading (Reg AT),
which closed on March 16 2016, is "hands off our computer
code", writes Dan Barnes.
"For the most part what they put out in
Reg AT are best practice rules that most high-frequency trading
(HFT) firms already follow," said Bill Hart, CEO for the Modern
Markets Initiative, a lobby group that supports HFT and
proprietary trading firms. "The one exception that we really
take issue with is the idea that the source code that we use to
run our trading systems should be available to regulators
without a subpoena."
Reg AT is a proposed rule that is intended
to mitigate some of the risk that the automated trading is
perceived to create in markets. Speaking in November 2015, at
an open meeting of the Commodity Futures Trading Commission
chair Timothy Massad introduced the proposal. He cited
"malfunctioning [trading] algorithms, inadequate testing of
algorithms, errors, and similar problems" as possible triggers
for market disruption. He also harked back to the 2010 'flash
crash’, in which the Dow Jones Industrial average
fell nearly 1000 points before recovering in a 35 minute
period, which he noted led the CFTC to first work with the
Securities and Exchange Commission on risk controls that would
minimise market disruption.
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