FIA and FIA PTG oppose overly prescriptive regulation of automated trading

1 May 2017

Washington, D.C.—Today, in response to the Commodity Futures Trading Commission’s (CFTC) supplemental notice of proposed rulemaking regarding Regulation AT, FIA and the FIA Principal Traders Group (FIA PTG) submitted comments opposing overly prescriptive regulation of automated trading. 

“Proposed Regulation AT is too prescriptive and is neither necessary nor appropriate to address the risks of automated trading,” said Walt Lukken, president and CEO of FIA.  “The industry has worked together for years developing the best practices and comprehensive risk management systems in place today. If the Commission still finds it necessary to move forward with regulations, we recommend replacing the current proposal with a principles-based approach that recognizes the importance of risk controls in protecting our markets while encouraging market innovation by being flexible enough to adapt to the pace of technological advances.”

The comments detail the principles that should form the basis of any automated trading regulation, and include recommendations on pre-trade and other risk controls, testing, order cancellation tools and unique identifiers.

“These principles are widely in operation in the industry,” Lukken said. “Importantly, they provide meaningful and appropriate risk management that is capable of evolving with market technology.”

Additionally, the letter continues to oppose access to proprietary source code used to operate automated trading systems without the protections offered by subpoena. “Source code deserves the same protections under the law as any other form of intellectual property,” Lukken said, reiterating previous comments.

The letter represents FIA and FIA PTG’s third comment letter on this proposed regulation. Additionally, FIA and FIA PTG provided a detailed response to the Commission’s 2013 concept release on risk controls and system safeguards for automated trading environments. These comments build upon industry-wide surveys of risk management procedures and six papers on best practices and guidelines for automated trading systems. All of this work can be found here.

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