Flash Crash Case Exposes Resource Gap Limiting CFTC, Massad Says

Timothy Massad
Timothy Massad, chairman of the Commodity Futures Trading Commission (CFTC). Photographer: Andrew Harrer/Bloomberg

The top U.S. derivatives regulator may seek new electronic trading rules following the arrest of a London man in a case tied to the 2010 flash crash even as it calls for more money to keep pace with fast-moving markets.

Commodity Futures Trading Commission Chairman Timothy Massad said the agency is looking at its own rules as well as procedures at exchanges such as CME Group Inc., which handled the transactions cited in the allegations against Navinder Singh Sarao.

“There has been a significant growth of electronic trading,” Massad told reporters in Montreal on Thursday. “We are looking right now at possible additional measures.”

Sarao was arrested Tuesday in London and charged by U.S. authorities of abusive algorithmic trading dating back to 2009. The Justice Department and the CFTC, which filed a related lawsuit, said Sarao’s trades contributed to the May 2010 plunge in which markets lost almost $1 trillion of value before recovering later in the day.

The CFTC has spent the past few years considering possible new rules for electronic and high-speed trading. The agency issued a concept release, a step preliminary to rulemaking, to consider controls for high-frequency trading to boost stability.

CFTC officials, who repeatedly assert that the agency lacks the funding to cope with its responsibilities, have said in the last year that they don’t have enough access to data about orders in the futures market that aren’t necessarily completed. The data resides at exchanges, such as CME’s, which are responsible for policing everyone who trades on them.

“We don’t have the resources to look at message data on a real-time basis or even a regular basis,” Massad said. “I’d like to be in the position to do more.”

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