US CFTC eyes its role in high-frequency trading
The US futures regulator must look carefully at new “risk controls” to protect markets in an era when trades are done 150 times faster than the blink of an eye, the head of a new technology panel for the Commodity Futures Trading Commission said yesterday.
The expanding use of algorithms to rapidly create and execute futures trades – combined with new responsibility for the vast over-the-counter swaps market – means the CFTC needs to evolve, Commissioner Scott O’Malia said.
“I recognise that just as trading left the pit and migrated to the computer screen, it is inevitable that technology will continue to challenge our existing market designs,” O’Malia said. “We must adapt to a new regime of oversight and surveillance, ensuring that the mission and customers are protected.”
High-frequency trading came under heightened scrutiny after the 6 May stock market “flash crash” that drove the Dow Jones index down some 700 points within minutes, even though traders have said their technology was not to blame.
“Common sense tells us that computer-generated trading – controlled by algorithms that spitfire trades in nanoseconds – contributed to the free-fall,” said CFTC Commissioner Bart Chilton.