New U.S. rules would demand accountability from high-speed traders
U.S. regulators have proposed new rules to increase surveillance of high-speed trading and intervene when it threatens the stability of markets.
The Commodity Futures Trading Commission on Tuesday proposed a registration standard for companies that use computer-driven trading, which now represents three-quarters of trading in some derivatives markets.
Such firms use complex algorithms and ultra high-speed connections to gain advantage in high speed markets.
That technology has led to a number of high-profile glitches, including one this summer that shut down the New York Stock Exchange for almost half a day and the May 2010 flash crash for equities.
The CFTC wants the firms involved, about 100 U.S. firms based mainly in New York and Chicago, to have kill switch policies and technology to cancel trades that disrupt markets.
They also would have to submit annual compliance reports about the risk controls and reveal their algorithmic trading procedures to the regulator, a controversial requirement because the software is proprietary.
"It contains a number of common sense risk controls that I believe recognize the benefits that automated trading has brought to our markets, while also seeking to protect against the possibility of breakdowns," said CFTC chairman Timothy Massad in Washington Tuesday.
Traders have 90 days to comment on the new rules.
A separate part of the proposal seeks to curb how often a high-speed trading firm is both buyer and seller on the same trade by requiring records of such trades.
