All ‘ayes’ on RegAT

Last week, following an open meeting on the subject, the CFTC’s motion to move forward with its proposed Regulation on Automating Trading (RegAT) was passed unanimously by 3 to 0.

Following a brisk set of opening remarks by Commissioners Bowen and Giancarlo, and a statement by Chairman Massad, the Division of Market Oversight valiantly attempted to present a case for the CFTC to safely and sanely regulate an industry practice moving at speeds far greater than they expected.

Amidst the commentary was the underlying challenge for the CTFC to keep up with the pace of technological change and the intrinsic understanding of how these advancements could impact markets. The CFTC’s proposed rulemaking appears to align somewhat with ESMA, including rules on kill switches and message throttling, as well as procedural guidelines to identify potential market abuse. The new proposal calls for mandatory “AT Trader” registration with the CFTC (a first for traditional proprietary trading). The CFTC also proposes a newly-defined regime for direct connectivity to exchanges and the monitoring of algorithmic trading systems – potentially at the source code level.

There is now a 90-day open commentary period on the proposed rules and we will be examining them in detail. But as we wait to hear the outcome of that consultation, the ayes still have it.

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