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FIA PTG Responds to CFTC Effort to Define HFT (Dec. 12, 2011)
On Dec. 12, the FIA Principal Traders Group submitted a letter to the Commodity Futures Trading Commission in response to a request for comment on a proposed seven-part definition of high-frequency trading that was issued by CFTC Commissioner Scott O’Malia on Nov. 14. In the letter, the FIA PTG agreed that the CFTC needs to understand the characteristics and behaviors of various types of market participants, but warned that the proposed definition would be too arbitrary to be useful. The FIA PTG suggested that the CFTC instead should create a new classification called “direct ATS participant”. This classification would apply to any firms or traders that use an automated trading system that is connected directly to an exchange. The advantage of this approach, the FIA PTG said, is that it would leverage data that are already collected by the major U.S. exchanges. For example, CME’s Globex electronic trading system requires each order to indicate whether it originated from an ATS. The FIA PTG also noted that risk controls should apply to orders submitted by all market participants, rather than a narrow subset that meets a definition of HFT, and encouraged Commissioner O’Malia to form a working group to further consider what types of risk controls should be applied to automated trading systems.

 Click here for the letter

Perspectives on High-Frequency Trading and Its Overall Impact on the Market (Sept. 1, 2011)
          The FIA Information Technology Division brought together a panel of expert practitioners on Sept. 1 to discuss high-frequency trading, explore common misperceptions about its impact on the exchange-traded markets, and explain its role in providing liquidity. The speakers were Richard Gorelick, Chief Executive Officer, RGM Advisors; Peter Nabicht, Chief Technology Officer, Allston Trading; Dean Payton, Managing Director, Deputy Chief Regulatory Officer, CME Group; and Don Wilson, Chief Executive Officer, DRW Trading Group. The discussion was moderated by John Lothian, President and Chief Executive Officer, John J. Lothian & Co.

  Click Here for a Video Recording

FIA PTG and FIA EPTA Provide Regulators with Views on the Impact of Technological Changes on Market Integrity and Efficiency (Aug. 16, 2011)
The FIA Principal Traders Group and the FIA European Principal Traders Association on Aug. 16 announced the public release of their joint response to a consultation report issued by the International Organization of Securities Commissions seeking public input on the impact of technological changes on market integrity and efficiency.  

Click Here for Press Release
Click Here for Full Text of IOSCO Response

FIA PTG Responds to Joint CFTC-SEC Advisory Committee Recommendations (Feb. 18, 2011)
Washington, D.C.—Feb. 18, 2011—The FIA Principal Traders Group today issued the following statement in response to the release of the Joint CFTC-SEC Advisory Committee’s recommendations regarding regulatory responses to the market events of May 6, 2010.

“The members of the FIA Principal Traders Group commend the Joint CFTC-SEC Advisory Committee for producing an extremely thorough and thoughtful examination of the policy issues arising from the extraordinary market turmoil that occurred on May 6 of last year.  We strongly support the committee’s focus on market structure issues and look forward to responding to the committee’s recommendations through the public comment process.  

“While we have not yet had an opportunity to consider the recommendations in detail, we share the committee’s concerns about the fragility of the U.S. equity markets during times of market stress.  We agree with the committee’s conclusion that market-based incentives are more effective than mandatory obligations in promoting well-functioning markets, and we look forward to working with the regulators and the exchanges on developing safeguards that will prevent clearly erroneous trades and other market malfunctions.  

“Members of the FIA PTG are working closely with the Commodity Futures Trading Commission and the Securities and Exchange Commission to help improve their understanding of current market practices and technology advancements.  The FIA PTG has been proactive in providing both agencies with detailed recommendations on how to improve industry risk controls, many of which can be implemented today by exchanges, brokers and other market participants.”

FIA PTG Recommends Risk Controls for Trading Firms (Nov. 4, 2010)
The FIA Principal Traders Group today released a report setting out a number of recommended risk controls for trading firms that have direct access to exchange matching engines. The report expands on a previous set of recommendations published in April 2010 and includes recommendations for risk controls applicable to trading operations and electronic trading systems. The recommendations covers such issues as access and oversight, pre-trade risk management, trading interruptions, post-execution and back office functions, physical security, electronic security, and business continuity.

Click here for a PDF of the recommendations

FIA and FIA PTG Support CFTC Co-Location Proposal
Click Here for Press Release
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

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
SEC Roundtable Reveals Sharp Differences of Opinion on High-Frequency Trading (June 2)
Market participants speaking at a June 2 public meeting at the Securities and Exchange Commission disagreed over whether high-frequency trading helps or harms the U.S. equity markets. Several agency brokers and institutional investors complained that high-speed trading is making the U.S. equity markets less stable and urged the SEC to restrict “predatory” trading practices. Their arguments were countered, however, by other participants in the discussion, including other institutional investors as well as several high-frequency trading firms. These participants emphasized that high-frequency trading benefits the equity markets by increasing liquidity and reducing trading costs, and they urged the SEC to proceed with caution before altering the existing regulatory framework.

Click Here for More Information