ICE Futures U.S. issued guidance in the form of Frequently Asked Questions regarding its trader identification requirements for electronic traders. Under ICE Futures rules, all persons who access ICE Futures’s trading system, whether manually or automatically, must utilize a unique identification. Traders using ICE Futures’s WebICE system must have a WebICE User ID, while traders accessing the market through a FIX connection must have a FIX User ID (Tag 9139) and an Authorized Trader ID ("ATID"; Tag 116 Right). WebICE User IDs are assigned by the ICE User Administration either directly by or through firms with direct access. FIX User IDs – which identify a FIX login – are also generated by the ICE User Administration upon request by a direct access company, while ATIDs – which identify the specific trader – are self-generated. ATIDs must be unique for each trader or for each automated trading system. The ATID for an ATS should reflect the individual that operates, administers and/or monitors the ATS, or all individuals in a group that perform these functions. ATIDs may not be shared among individuals except for multiple individuals that operate an ATS. Manual orders entered by an ATS operator must have a separate ATID, distinct from the ATS’s ATID. Certain traders must register their ATIDs with ICE Futures (or other ICE exchanges), such as individual ICE Futures members or employees of individual members or certain firms who participate in special exchange-administered fee discount programs. ICE Futures U.S.’s new FAQs will be effective March 1, absent objection by the Commodity Futures Trading Commission.
Compliance Weeds: Requirements regarding the use of trader identifications and related matters for electronic orders vary from exchange to exchange and the devil is in the details. For example, CME Group rules make explicitly clear that team tags – representing a group of persons who simultaneously administer, operate and monitor an automated trading system – would be expected to change for different shifts. (Click here to access CME Group MRAN regarding Tag 50 ID Requirements Q/A 11.) The new proposed guidelines of ICE Futures U.S. have no similar express requirement regarding team tags and the obligations around shifts. (Click here to access new ICE Futures US proposed FAQ Q/A9.) Also, exchanges impose express responsibilities on clearing members that sponsor persons who directly place electronic orders with exchanges. Among other things, a clearing member:
must for each person it authorizes for direct access, “take any and all actions requested or required” by an exchange, including requiring such person to produce documents, provide information and answer questions in connection with any investigation. (Click here to access ICE Futures U.S. Rule 27.04(c)(i) and here for CME Group Rule 574 – 3d paragraph.); and should take “appropriate action” if the clearing member has actual or constructive notice of a violation of an exchange rule; otherwise it may be found to itself have engaged in conduction detrimental to the exchange. (Click here to access ICE Futures U.S. Rule 27.04(d) and here for CME Group Rule 574 – last paragraph.)
Clearing member sponsors must be aware of these responsibilities and should implement and maintain policies and procedures reasonably designed to help them comply with their obligations
My View: Whenever I write about exchange requirements regarding electronic orders and direct access persons, I wonder about the value add of proposed Regulation Automated Trading by the Commodity Futures Trading Commission. (Click here for background regarding the CFTC’s supplemental proposal in the article “Proposed Regulation AT Amended by CFTC; Attempts to Reduce Universe of Most Affected to No More Than 120 Persons” in the November 6, 2016 edition of Bridging the Week.) As I have suggested previously, it appears that the CFTC could accomplish most of its objectives by better leveraging existing exchange requirements and plugging what it perceives to be gaps through amendments to core principles for designated contract markets. It is not clear what more prescriptive regulation at the federal level functionally adds, other than substantial costs and ambiguity.