TheCommodity Futures Trading Commission, (CFTC), is proposing rules in effort toreduce the amount of complications related to automated trading.
One disruptionthat occurred because of an ATS error was the ‘Flash Crash’ in May of 2010 andin October of 2014 when the treasury and securities market experiencedunprecedented volatility. The new regulation only effects those who arepracticing in algorithmic trading. Algorithmic trading is defined by the CFTCin two ways. One, where one or more computer algorithm is used to make anydecision about whether or not to place an order. And two, any ordermodification or cancellation being electronically submitted without any humaninput. Individuals who manually enter information regarding an order will notbe subject to the new regulation.
Additionally, algorithmic traders are goingto be now subject to registration requirements. Through the new rule, the CFTCis proposing that all automated traders go through an official registration processwith the CFTC. Furthermore, it would now be required for all traders to complywith at least one other registered futures association, known as RFAs, tototally fulfill the new mandate. For those traders who engage in algorithmictrading through the use of source codes, it should be known that by the newrule, the government is entitled to inspect any source code for any reason andat any time. Industries Affected: New regulations would make it harder forcompanies to exccute