On May 1, FIA and the FIA Principal Traders Group submitted a joint comment letter opposing overly prescriptive regulation of automated trading. The comment was filed in response to the Commodity Futures Trading Commission’s supplemental notice of proposed rulemaking regarding Regulation AT.
The comment letter detailed the principles that should form the basis of any automated trading regulation, and offered recommendations on risk controls, testing, order cancellation tools and unique identifiers. The letter also expressed the groups’ opposition to the CFTC’s proposal to access proprietary source code used to operate automated trading systems without the legal protections provided by the subpoena process.
“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. “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 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 CFTC’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.