Breaking: CFTC May Re-propose HFT Regulation after 5 Years

Source: Fazzaco 2020-06-23

The development of Fintech and expansion of computer technology in financial industry has resulted in increasing share of algorithmic trading, high-frequency trading (HFT) and other automated trading, which has now amounted to over 50% of the total trading volume, in the European and US market.

However, in recent years, HFT has aroused keen discussion for triggering some big market events. According to the latest news, the Commodity Futures Trading Commission (CFTC) is putting forward proposal on the regulation of HFT traders.

Re-proposing HFT Regulation after 5 years

Compared with previous regulation plan, the new rules proposed by CFTC will have a significant change, according to an insider.

In the new regulation proposal, CFTC stressed that the exchanges must take actions to prohibit unexpected outage caused by algorithmic trading,which may require HFT traders to file an application to CFTC for registration.

HFT Regulation Bristled with Difficulties

People holds ambivalent attitudes to HFT. The supporters think that it has improved market liquidity and removed bid-ask spreads,making the market price more effective. But the opponents consider it speeds up the price discovery by high trading volume and increases market volatility and damage structure of capital market.

On September 17th,2009, the U.S. Securities and Exchange Commission voted to propose a rule amendment that would ban flash orders,which utilize power computers to look at investors’ orders.

On January, 14th,2010, the Securities and Exchange Commission (SEC) approved the issuance of a “concept release” concerning equity market structure. The SEC seeks comment on a range of issues, including HFT.

On May 20th, 2010, CFTC reestablished a Technology Advisory Committee (TAC) to give advice on HFT regulation.

On February 18th, 2011, a joint CFTC– SEC advisory committee released “Recommendations Regarding Regulatory Responses to the Market Events of May 6, 2010”, a report contained 14 regulation recommendations and most of them are related to HFT.

On September 13th, 2013, CFTC published “Concept Release on Risk Controls and System Safeguards for Automated Trading Environments”, indicating a more explicit policy to the systematization and institutionalization of HFT regulation.

On October 16th, 2014, SEC issued a suspension and termination order for market manipulation on HFT.

It seems that HFT regulation bristled with difficulties. But the re-proposal by CFTC indicated its determination to strengthen regulation, and the golden age of HFT may be facing a turning point.

Breaking: CFTC May Re-propose HFT Regulation after 5 Years

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