The CFTC has voted to establish a Subcommittee on Automated and High Frequency Trading tasked with developing recommendations regarding the definition of high frequency trading (“HFT”) in the context of the larger universe of automated trading.
This definition of HFT is anticipated to serve as an initial step towards assessing the presence and impact of HFT in CFTC regulated markets for consideration of appropriate regulatory and policy responses.
Since its inaugural meeting, the TAC has focused on one of the most important technological evolutions in trading behaviour: automated trading. This shift in terms of speed and volume has challenged the exchanges’ and the Commission’s ability to ensure market integrity and safeguard against market misfires such as flash crashes.
“I think the Technology Advisory Committee through advice and guidance this new Subcommittee on Automated and High Frequency Trading will provide a much needed holistic approach to identifying the criteria the Commission needs to incorporate into any further decision making regarding automated trading and HFT,” says Scott D O’Malia (pictured), the chairman of the Technology Advisory Committee (TAC)
O’Malia has decided to breakout four separate working groups, each tasked with identifying specific issues associated with automated trading. The first working group will be tasked with defining high frequency trading within the context of automated trading systems. The second group will examine whether or not there should be multiple categories of HFT. Specifically, that working group will be requested to examine distinctions in trading activity and how such distinctions should be tagged by the exchanges. The third working group will focus on oversight, surveillance and economic analysis, to understand how HFTs behave as compared to other automated systems. The fourth working group will address market micro structure issues to identify possible disruptions that might be provoked by automated trading systems and potential solutions to mitigate such events.
The subcommittee will be chaired by Andrei Kirilenko, Chief Economist, with additional Commission staff members serving as coordinators for Subcommittee working groups, and will report to the full Technology Advisory Committee.
In addition to establishing the subcommittee the Commission also requested that individuals who are interested in participating on this subcommittee should submit their nominations to Andrei Kirilenko within 14 days after the noticed is published in the Federal Register. The Commission is looking for approximately 20 knowledgeable individuals. In the interest of ensuring that the membership is comprised of qualified representatives from industry, exchanges, academia, international regulatory and/or advisory bodies, groups representing interests or organisations involved in and/or affected by the development, design, and operation of automated trade systems and HFT, and government agencies are encouraged to submit their nominations to the Commission via the attached notice in the Federal Register.