As 2019 came to a close so too did the FIA Principal Traders Group’s (FIA PTG) first decade of advocacy work. Since inception in January 2010 we have successfully established ourselves as a “go to” resource for regulators and policymakers as well as media on a wide variety of industry topics. During this time, we have worked to emphasize the important role of the liquidity provider while constantly looking at issues that may impact the function, fairness and stability of markets. We have produced best practice recommendations and white papers on topics ranging from risk controls for automated trading to liquidity to market structure and filed over 100 letters on a broad range of topics across asset classes.
This year we continued to build on our relationships with the US regulatory agencies through over one dozen meetings with Commissioners and staff. The topics discussed included: automated trading regulation; various market structure issues including artificial latency mechanisms; the impact of the leverage ratio and support for the move from CEM to SA-CCR; swap execution facility (SEF) issues including the proposed Commodity Futures Trading Commission (CFTC) SEF rule, post-trade name give-up consultation and Floor Trader Swaps Exclusion; and digital assets.
In addition, we filed 16 letters on a wide variety of topics including: SEF rule proposals; speed bumps and other market structure impacting exchange proposals; the supplemental leverage ratio calculation methodology; the Consolidated Audit Trail (CAT); reporting of corporate bond block trades; Central Counterparty (CCP) default auctions; and digital assets. And finally, after seven years of advocacy, we asked for and received from the CFTC no-action relief to clarify the existing Floor Trader Swaps Exclusion which facilitates our members providing liquidity on SEFs without having to register as Swap Dealers.
The first half of 2019 was driven by discussions of market structure across asset classes. Other advocacy work addressed crypto assets, trade reporting and the supplemental leverage ratio.
After nearly five years of advocacy work on what effective regulation of automated trading should look like, FIA PTG members were happy to hear in October that the Commodity Futures Trading Commission (CFTC) had abandoned the original version of proposed Regulation Automated Trading (Reg AT). Since the publication of its first paper on the subject in 2010, Recommendations for Risk Controls for Trading Firms, FIA PTG has taken an active role in identifying risks and working to strengthen safeguards in futures markets globally. Rather than very prescriptive regulation like Reg AT, FIA PTG believes that principles-based requirements, appropriate to the role of the market participant, that can evolve with the market and avoid unnecessary complexity will ultimately best serve the market.
In 2018 FIA PTG continued to build relationships at the regulatory agencies through 14 meetings with Commissioners and staff. The meetings covered a variety of topics, including digital assets, equity, swap and treasury market structure, regulation of automated trading (Reg AT), and capital and supplemental leverage ratio (SLR) constraints. Advocacy continued in opposition to artificial latency mechanisms in the US as well as the EU, but was expanded to cover market structure issues more broadly, including letters on treasury and swap market structure concerns, as well as a comprehensive white paper on suggested equity market structure, specifically Regulation NMS, reforms.
As part of a continuing effort to foster a productive, data-driven discussion about the nature of liquidity and liquidity provision, in March, FIA PTG released a white paper entitled Liquidity in Today’s Markets. The paper included a comprehensive discussion regarding the definition and measurement of liquidity as well as setting forth principles that FIA PTG believes are foundational to healthy, liquid markets.
The first half of 2018 was driven by discussions of bitcoin and digital assets. At CFTC Advisory Committee meetings, FIA PTG emerged as a thought leader in this area. Other advocacy work addressed automated trading, equity market structure, CAT fee structure, and the impact of new capital rules including the supplemental leverage ratio.
For members of FIA PTG, 2017 may be remembered as the year of the speed bump, as it was filled with a variety of proposals to introduce artificial latency mechanisms to equity market exchanges. Nearly a third of FIA PTG’s advocacy letters were comments to regulators about the problems, complexity, and costs introduced by these artificial latency mechanisms. FIA PTG evaluated and responded to each proposal individually, but urged the Securities and Exchange Commission (SEC) to impose a moratorium on new types of artificial delays until it is able to complete a comprehensive review of Reg NMS. 2017 also saw the start of the Trump administration, bringing with it new leadership at the SEC, the Commodities Futures Trading Commission (CFTC), Treasury, and other regulators. FIA PTG built relationships through 14 regulatory meetings and another 11 with members of Congress and their staffs. The meetings covered a variety of topics, including swap market structure, capital requirements, regulation of automated trading (Reg AT), equity market structure, treasury market structure, and liquidity.
In the first half of 2017, FIA PTG members sent 12 comment letters and conducted 19 meetings with policymakers.
2016 was an active year for FIA PTG, with members weighing in on 13 regulatory comments over the course of the year. FIA PTG members’ advocacy for principles-based risk controls in general, and our work on the issue of source code access in particular, earned the group a reputation as a thought leader on the CFTC's proposed regulation of automated trading. On the equities front, 2016 was the year of the speed bump. FIA PTG presented comprehensive and detailed arguments against allowing intentional delays in protected quotes. This advocacy work earned FIA PTG media coverage in outlets worldwide, from Chicago to New York and from London to Mumbai.
In the first half of 2016, FIA PTG members sent 7 comment letters and conducted 17 meetings with regulators and legislators.
In 2015, policy makers initiated a variety of discussions on market structure, conducting studies, producing reports, and holding public roundtables. FIA PTG was an active participant in these discussions, whether through direct member participation or through comment letters and media outreach. FIA PTG’s work spanned a variety of markets and regulators, firmly establishing the group as a thought leader on market making and automated trading, regardless of asset class. FIA PTG’s advocacy and messaging emphasized the need for data-driven analysis and a principles-based approach to policy making to ensure transparent, accessible, and competitive markets.
A progress report on FIA PTG's 2015 Advocacy and Outreach Goals
In 2014, FIA PTG was actively engaged with lawmakers, regulators, and members of the media on issues surrounding transparent, accessible, and competitive markets. FIA PTG continued our advocacy work with regulators on issues including central trading of futures, centrally traded and cleared swaps, and automated trading. Notably, FIA PTG expanded our work on automated trading into equity market issues. FIA PTG members have strengthened relationships with SEC regulators and established our group as a valuable contributor to policy discussions on equity market structure.
FIA PTG coordinated its membership action this year on a wide range of projects and continued its outreach to legislators, regulators, and media. We also expanded our scope to include a number of issues related to equities. In addition, we hosted seven meetings of the group and established a Compliance Networking Group.
FIA PTG continued to work actively with regulators, legislators and members of the press to increase understanding of the role of principal traders in the markets. We visited with members of the House and Senate Agriculture and House Financial Services committees. We met with CFTC Commissioners and participated in the CFTC Technology Advisory Committee and Subcommittee on High-Frequency Trading. We also led comment letters to the CFTC on block thresholds for swaps, clearing requirement determination and requested and received limited no-action relief from swap dealer registration.
FIA PTG continued its growth by adding nine new Member Firms and creating and adopting FIA PTG Bylaws. We supported FIA in creation of new division – the FIA European Principal Traders Association (FIA EPTA). FIA PTG members were actively engaged with legislators, sponsoring a luncheon for Senator Stabenow and briefing both majority and minority staff on the House Agriculture Committee. We also worked with regulators on priority issues including equal access to centrally cleared OTC markets; CFTC rules to clarify disruptive trading practices; rulemaking for defining and establishing requirements for swap dealers; tax policies which impact PTGs; and communication/education on current market issues, such as DMA.
FIA PTG was formed in January of 2010 to provide a forum for proprietary trading groups to identify and discuss issues confronting the PTG community; define common positions on public policy issues and advance the group’s collective interests through the FIA; improve public understanding of the constructive role played by proprietary trading groups in the exchange-traded derivatives markets; and promote cost-effective, transparent access to U.S. and non-U.S. markets.
- FIA PTG