The voice of reason

Electronic trading has fundamentally revolutionised financial markets in the last few years. But events such as the flash crash and the recent trading malfunction at Knight Capital have given market participants and regulators cause to worry that Pandora’s Box has been opened. Much of the concern raised by politicians and regulators is down to uncertainty; there is little knowledge available that describes how automated trading systems are operated within brokerage firms.

To address these concerns the Futures & Options Association has today published its Guidance on Systems and Controls for Electronic Trading Environments. This insightful paper, which Fidessa gladly contributed to, aims to establish a best practice guide, clarify how the various market participants relate to one another and suggest approaches to the form and content of required documentation, all of which should bring comfort to the policy-makers. A long list of topics is covered in the guidance such as pre-trade risk checks, conformance testing, stress testing, training, authorisation and more.

I recommend that you read the paper to see for yourself how actively focused and engaged the industry is in dealing with concerns in respect of market surveillance, risk management and system monitoring. For those of you who felt a sense of unease reading the ESMA guidelines on systems and controls in an automated trading environment, the FOA guidance paper will restore your peace of mind.

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