On November 24, 2015, the US Commodity Futures Trading Commission approved proposed rules, known collectively as Regulation Automated Trading (or otherwise known as Regulation AT), that aim to implement risk controls, transparency measures, and other safeguards to enhance regulation of automated trading on US Designated Contract Markets. The proposed risk controls, including maximum order message and size parameters, standards for development, testing and monitoring of algorithmic trading systems, among other requirements, would apply to: (i) market participants using algorithmic trading systems, referred to as “AT Persons” in the proposed rules; (ii) clearing member Futures Commission Merchants with respect to their AT Person customers; and (iii) DCMs executing AT Person orders. Regulation AT would require submission of reports on risk controls, as well as maintenance of books and records regarding such risk controls and other algorithmic trading procedures, by AT Persons and clearing member FCMs for review by DCMs. The proposed rules would also require registration of persons engaged in significant proprietary algorithmic trading in key products through direct electronic access to a DCM who are not currently registered with the CFTC. Regulation AT is intended to include greater transparency around DCM trade matching platforms and promote use of self-trade prevention tools by market participants on DCMs. Finally, in response to evolving markets and trading technology, Regulation AT would require all AT Persons to become members of a Registered Futures Association and further require RFAs to consider membership rules addressing algorithmic trading for each category of member in the RFA. The notice of proposed rulemaking will be open for a 90-day public comment period.
The CFTC press release and the proposed rulemaking are available at: http://www.cftc.gov/PressRoom/PressReleases/pr7283-15 and http://www.cftc.gov/idc/groups/public/@newsroom/documents/file/federalregister112415.pdf.