The FIA Principal Traders Group provides a forum to discuss issues impacting its members and advance the members’ collective interests. NEWS U.S. Politicians Take Differing Views on High-Frequency Trading (Sept. 1, 2010) Several members of the U.S. Congress engaged in further debate during the month of August over the role of high-frequency trading in the U.S. equity markets. Two Democratic members of the Senate called for greater regulation of high-frequency trading, while two Republican members of the House came out in defense of this type of trading activity. On Aug. 5, Senator Ted Kaufman, a Democrat from Delaware, submitted a list of nine regulatory recommendations to the Securities and Exchange Commission to address what he called “serious flaws” in the structure of the U.S. equity markets. Kaufman specifically urged the SEC to create an “effective regulatory regime” for high-frequency traders. This should include finalizing its large trader tagging and consolidated audit trail proposals, requiring high-frequency traders to certify that their algorithms do not manipulate market prices, issuing guidance on the types of trading patterns that would constitute unlawful manipulation, and imposing “liquidity provision obligations” on high frequency traders. On Aug. 11, Senator Charles Schumer, a Democrat from New York, wrote a letter to SEC Chairman Mary Schapiro urging the agency to impose market maker obligations on high-frequency traders. Schumer outlined several specific conditions for such obligations, but noted that the SEC also should consider “appropriate incentives for high-frequency traders to become market makers given the cost of these obligations. On Aug. 24, Representatives Spencer Bachus, a Republican from Alabama, and Jeb Hensarling, a Republican from Texas, sent a joint letter to Schapiro protesting the “ad-hoc” nature of SEC rule-makings in this area and urging the agency to rely on “economic and empirical market data, not political pressure,” in determining how to respond to changes in market structure. The two lawmakers, who sit on the House Financial Services Committee, asked Schapiro to provide the SEC’s analysis of the costs and benefits of several proposed rules and urged the agency to consider the potential impact on liquidity providers. Click Here for Kaufman Letter Click Here for Schumer Letter Click Here for Bachus and Hensarling Letter FIA and FIA PTG Support CFTC Co-Location Proposal (July 12, 2010) Responding to a request for comment from the Commodity Futures Trading Commission regarding a proposed rule on co-location and proximity hosting services, the Futures Industry Association filed a comment letter on July 12 expressing its support for the CFTC’s efforts to promote transparency and fair access to the futures markets. The FIA comment letter also reflects the views of the FIA Principal Traders Group, a forum for firms trading their own capital to identify and discuss issues confronting the principal trading community. One of the group’s stated goals is to promote cost-effective, equal and transparent access to U.S. and non-U.S. markets. The FIA expressed support for the CFTC’s proposed requirement that exchanges provide equal access to co-location facilities and allow third parties to provide proximity services. The FIA asked the CFTC to consider third party sites as well as an exchange’s own co-location facility as meeting access requirements rather than the exchange facility alone. The FIA also supported requiring exchanges to publish latency data for direct connections from their co-location facilities and other access points to an exchange matching engine, but recommended against applying a similar requirement to other types of connections between market participants and third party providers of access. The latency data should cover average, shortest and longest latency and should be reported quarterly, the FIA said. The association also encouraged exchanges to ensure equality of access within data centers by establishing the same distance from rack space to matching engine throughout the data center. Click here for the letter Futures Trading And Oil Price Movements (June 2010) The fundamentals of supply and demand are the key components affecting oil prices and the positions taken by traders and speculators also reflect those economic factors, according to a study published in the latest issue of Kent State University and the Institute for Financial Market’s Review of Futures Markets. The study was written by Arjun Chatrath, a professor at the University of Portland, Rohan Christie-David, a professor at the University of Louisville, and two graduate students, Victoria Lugli and Cynthia Santoso. This article is re-printed by permission of Review of Futures Markets. Click Here to Download Article For more information about this publication, please see links below. http://business.kent.edu/rfm http://business.kent.edu/rfm/subscribe.asp FIA PTG Retains Jim Overdahl as Spokesperson (June 16, 2010) The FIA Principal Traders Group announced today that Jim Overdahl, who has served as chief economist at both the Securities and Exchange Commission and the Commodity Futures Trading Commission, has been retained as the group’s spokesman. He will be responsible for articulating the group’s views on public policy issues and improving public understanding of the role played by principal trading firms in the financial and commodity markets. Click here for the press release CFTC to Examine High-Frequency Trading on July 14 The Commodity Futures Trading Commission has re-established its Technology Advisory Committee and plans to discuss high-frequency trading at its first hearing on July 14, according to Scott O'Malia, the CFTC commissioner who is heading up the panel. O’Malia said the hearing will include a presentation on recent CFTC research into high-frequency trading and its impact on the futures market. Other hearings to follow will address co-location, automation of CFTC data collection, swap execution facilities and other issues. The CFTC committee will include academics, exchanges and clearinghouses, trading firms, futures commission merchants, end-users and banks. Click Here for O’Malia’s Statement FIA Issues DMA Risk Recommendations (April 27, 2010) The FIA has issued a report that recommends a number of principles for managing the risks in direct access to exchanges. This type of arrangement has become increasingly common among derivatives exchanges in many parts of the world. The report recommends that exchanges establish certain risk controls and apply those risk controls across all trading firms. This will ensure a level playing field in terms of the latency of trading and avoid creating competitive pressures among clearing firms and trading firms to reduce the latency of trading by applying fewer risk controls. The report was drafted by a working group consisting of representatives from derivatives exchanges, clearing firms and trading firms. The report is the latest in a series of FIA initiatives that promote best practices in the listed derivatives markets worldwide. Click here for the report

Thursday, September 02 Bloomberg Algo Shines Light into Dark Pools (Traders)  31  India’s Tata opens Singapore exchange (Datacenter Dynamics)  22  SEC Probes Canceled Trades (WSJ)  6  G.H. Financials gets remote access to Japan (FT)  3  SGX working on solving clearing and settlement issues (Asian Investor)  2  CBOE Lures Street Banks, Brokers (WSJ)  2  Read More E-clips » E-clips users: Please note that these news stories are drawn from independent sources. The FIA does not verify or endorse any of these articles, and takes no responsibility for their contents. Please contact Will Acworth at the FIA if you have any questions or suggestions regarding this service. (202) 466-5460