The FIA European Principal Traders Association released a paper on Oct. 6 outlining its views on the systems and controls needed to manage risks in automated trading. The paper was drafted by the association in response to a consultation issued by the European Securities and Markets Authority and contains a number of specific recommendations for policies and procedures that should be implemented by trading firms, intermediaries and trading platforms.
“The members of FIA EPTA have a vested interest in well-regulated markets and strongly support regulatory initiatives to protect the stability and integrity of the markets,” said Remco Lenterman, the association’s chairman. “Our members welcome this effort by ESMA to provide clarity on the obligations for trading platforms, investment firms, and direct market access and sponsored access under the existing legal framework.”
FIA EPTA said the guidelines proposed in the ESMA consultation paper will offer more clarity and consistency on the requirements with which trading platforms and investment firms have to comply, and said there is already a high degree of compliance with these guidelines among the members of FIA EPTA. The association urged regulators to take a “proportional approach” that adjusts the requirements depending on the nature, scale and complexity of trading activities. The association also urged regulators to allow flexibility in the application of these guidelines, and noted that best practices in risk management are continually evolving in light of changing circumstances and technological improvements.
“Regulators should be hesitant to ‘freeze’ the state of the art by imposing a particular set of risk management controls on market participants,” said Lenterman. “To do so may prevent the application of more effective risk management tools as technology becomes increasingly sophisticated.”
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