The U.S. Commodity Futures Trading Commission (CFTC) has proposed new rules on Tuesday that would introduce a series of risk controls, transparency requirements and other measures to enhance the U.S. regulatory regime for automated trading.
The proposed rules, which are known as Regulation Automated Trading (Reg AT) and open for a 90-day public comment period, are intended to reduce potential risks arising from algorithmic trading activity. Reg AT will require that risk controls be adopted, such as maximum order message and maximum order size parameters; it will establish standards for the development, testing and monitoring of automated trading systems.
The rules would also require certain proprietary traders to register with the CFTC. The proposed registration requirement would apply specifically to prop traders engaged in algorithmic trading through direct electronic access.
In addition, the rules would: require traders to adopt tools to prevent self-trading; introduce measures to increase transparency by electronic trade matching platforms, and in connection with certain activities, such as firms’ market-maker and trading incentive programs; require certain traders to become members of a registered futures association (RFA); and oblige the RFAs to consider rules dealing with algorithmic trading.