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High-Frequency Traders Face Crackdown As CFTC Proposes Tougher Regulations - Live Feed
CFTC meets this morning to propose a registration standard applying to as many as 100 firms that have changed markets by trading their own money using complex algorithms and advanced technology. As Bloomberg notes, this proposal follows more than 5 yrs of debate about market disruptions, such as the May 2010 flash crash. Crucially, as is well known now, high-speed, automated trading in recent years has surged to account for almost three-quarters of certain derivatives markets which means any regulatory crackdowns will no doubt have impacts on markets.
As Bloomberg adds,
High-speed and other forms of computer-driven trading have surged in recent years to make up almost three-quarters of trading in some derivatives markets. One top U.S. regulator now wants to catch up.
The Commodity Futures Trading Commission on Tuesday is set to propose a new registration standard that would affect as many as 100 firms that have changed markets by trading their own money through complex algorithms and advanced technology like microwave towers. The rules are designed to help the agency oversee firms that represent a significant amount of trading but so far haven’t had to directly follow key government policies for curbing risk.
The proposals are the biggest step by the CFTC to oversee automated trading. Over the past five years, disruptions such as the May 2010 flash crash and a series of technological failures in equities trading have spurred questions about the resilience of markets and led to a debate over the best way to regulate. The CFTC has already spent two years reviewing industry feedback on just the possibility of new rules.
“It’s time for regulators to have laws and regulations that are commensurate with the realities of trading today,” Bart Chilton, a former commissioner at CFTC who has provided advice to a group of high-frequency traders, said yesterday in an interview. “Clearly some of the rules are antiquated.”
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The agency’s plans being discussed on Tuesday would require automated trading firms to have kill switch policies and technology to cancel trades that could disrupt markets. They would have to submit annual compliance reports about the risk controls and keep records on their algorithmic trading procedures.
The agency’s proposal would also require firms to have a repository for the computer code that makes up their electronic trading systems. That would give the CFTC an easier way to inspect and review algorithms to see what role they played in a market malfunction. That may prove a controversial requirement because trading code contains firms’ secrets and trading strategies.
The CFTC is also moving to require greater transparency around incentive programs exchanges such as CME Group Inc. and Intercontinental Exchange Inc. offer to spur trading in derivatives. The agency said those programs may encourage unnecessary amounts of trading.
A separate part of the proposal seeks to curb how often a high-speed trading firm winds up being on both sides of the same trade, a practice highlighted by regulators in a report on price swings in the Treasury market in October 2014. Exchanges would need to publish quarterly statistics on the amounts of self-trading.
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Cool story bro! Tell me another. But make this one more believable.
The HFT Firms will write the rules in their favor so nothing to see here.
Yes, just like the solution to HFTs running stop orders is to get rid of stop orders. Brilliant
Also, they're saying the NYSE is going to discontinue good til cancel orders. Because, you know, flash crashes...
Hey, remember when Bart said he could find zero instances of futures manipulation? And then the Crude Platts, BarCap Interest, London Gold Fix, Futures Spoofs and 2 flash crashes all happened under his watch?
Good times.
Bart did his best, for Bart. He simply sold out to the highest bidder. Look where he is now!
Bart Shiton? It was under his watch that everyone started calling the COMEX the CRIMEX. Nuff said..
I bet banks are exempt from these rules.
Oh Fucking PLEASE! The CFTC isn't going to crack down and any fucking thing unless it serves the bankers.
Yes, only after every single last fraction of a cent has been wrung from the system does this even come up for discussion. Then, some new system to screw us all over will be put in place where nothing changes, just like the "new" gold fix.
Something tells me this is all show and won't change things much.
You think? About a year before the PFGBest debacle (I had an account there) I was sitting right in front of my computer, with a trade screen open, about ten minutes before the close, and watched someone 'bang the close', and take out my position. I was outraged... I had all kinds of documentation, screen shots, etc and filed a formal complaint with the CFTC. Got a call from one of their 'useless eaters', gave more info, and NEVER heard back from them, one way or the other. Then of course not long after that they busted the lunatic owner of PFG, and my account vanished, and what was left was torn apart by the bankruptcy judge and the appointed "trusty' in Chicago. That was it, I was done that day. Markets are a joke, any kind of oversight is laughable, I wont waste any more time on it in this lifetime.
Yeah right. Give us 10% or we'll shut you down.
If they enforced the existing laws that would be a start!
see below - they are nothing but automated front-runners in an arms race to zero latency.
can we PLEASE stike the phrase "high-frequency trading" from the english language & call it what it actually is: "low-latency frontrunning"?!?
can anyone make a compelling rational case that the later is not a FAR more accurate description than the former?
Hold on. Let me run this through the BS decoder:
The HFT's will be allowed to work with the CFTC to craft regulations that further enhance their ability to game the system while the CFTC can claim that they have "Cracked down" on illicit activities...?
Fuck the government and their banker cohorts.
"Clearly some rules are antiquated"
Hmmm, now where did I hear that before? Oh yeah, right before they repealed Glass-Steagall with the Bank Modernization Act."
Oh isn't that cute? They are going to regulate that, boy.
You betcha.
Give me a freaking break.
I hate it when the whores openly troll like this.
So it's a Happy Thanksgiving and a Merry Christmas a little early this year for the HFT firms?
I guess with Obama leaving after next year, the powers that be are getting their "rules and regs" put in place now so their activities can continue after Obama's gang is gone.
If you're waiting for prudent legislation or regulation of HFT, don't hold your fucking breath while you wait. Unless they make certain orders illegal, address the problems presented by co-location of computers, and find regulators with balls who aren't paid off, nothing will change. Skimming and front-running are major sources of revenue. These outfits (including the Fed and Wall St) will not be happy if anyone makes a serious attempt to rock this boat.
Exactly. Don't forget the CFTC's five year investigation into gold and silver manipulation, coming to the conclusion "there is no manipulation."
'Crackdown' ... yeah, un huh.
Why not trading just once a day? I recall when i was first stating with stocks i had to go to brocker and prepare buy buy/sell order 1 day in advance. The trade was performed next day.
Why do you need to trade 24/7?
Once a day at all stocks globaly at 0GMT. For normal bussines it would work great would be tough for speculations tho.
Why it is not once a day, becouse they NEED speculations so eazy cash can be stolen from investors who actually are interested in real stocks of real companies.
Most people, such as pension funds or other large investment groups, just want to invest their money, or get the best price when they sell something. If a stock is selling at $86 and there is an offer of $87, why should some fucking third party with no skin in the game take money away from both the buyer and the seller using computer algorithms? And stocks are just the tip of the iceberg. The real action is in the FX markets. Trillions/day get subjected to this goddamned treatment.
To financial sociopaths, there are NO rules governing their lyin' and stealin'.
The only way to beat them is NOT to do business with them.
The CFTC, the FUCKING CORRUPT entity that was the playground of Gensler who got the fuck out of Dodge when his cocksucking buddy Corzine was confirmed to be a criminal.
FOOL ME ONCE, SHAME ON YOU............................
HFT was called front-running when humans did it. Machines are beyond prosecution. A few cents per share tax on computer trades might help clean it up.
HFT...LOL...gee, they are kind of early on this one. Usually the asspumps at the CFTC make the obligatory, fake "look, we really do care" investigation months or even years after the alleged criminal activity, at the point where people do not remember it, or even care any longer...
#HFTlivesDontMatter
the cftc threatening them with action is basically akin to them saying that the brown-paper-bag drops made every thursday night need to be doubled.