High-frequency trading should be defined before the U.S. Commodity Futures Trading Commission sets rules for what amounts to about half of the volume of futures markets, said Scott O’Malia, a member of the panel.
The CFTC needs a better understanding of the practices as it debates new testing and supervision rules for high-frequency and automated trading, O’Malia said in a speech prepared for a Securities Industry and Financial Markets Association conference today in New York.
“Before we implement a new regulatory regime on any continent or in cyberspace, I believe we need to agree on what and who compromises this growing segment of our markets,” said O’Malia, a Republican.
The CFTC, with the Securities and Exchange Commission, has scrutinized such trading since May 6, 2010, when $862 billion was erased from stock values in 20 minutes in the so-called “flash crash.” The agency has been drafting a release on new rules, a regulatory step prior to proposed rules.
The CFTC’s technology advisory committee, led by O’Malia, is meeting tomorrow to discuss definitions of high-frequency trading. Participants include Supurna VedBrat, managing director and co-head of electronic trading and market structure at BlackRock Inc. (BLK); Gary DeWaal, general counsel of Newedge USA LLC; and Charles Vice, president and chief operating officer of Atlanta-based Intercontinental Exchange Inc. Ben MacDonald of Bloomberg LP, parent of Bloomberg News, is a member of the technology panel.
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