FIA President and CEO Walt Lukken today made the following statement after the CFTC voted to finalize Electronic Trading Risk Principles and significant bankruptcy reforms for FCMs and clearinghouses, among other rulemakings.

The CFTC electronic trading proposal reflects a carefully reasoned principles-based approach that provides flexibility to the agency and builds on the industry’s efforts over the years to mitigate risks. FIA also recommended several changes to the original bankruptcy proposals, which were adopted unanimously by the CFTC.

.@CFTC passes Automated Trading Risk Principles 4-1. @FIAconnect and @FIAPTG comments on this rule: https://t.co/RBdEKk4aCn

— FIAconnect (@FIAconnect) December 8, 2020

“Electronic trading has brought enormous benefits to markets and customers through greater efficiency and deeper liquidity, but like any new technology it also creates new risks. For that reason, FIA and FIA PTG have worked for more than a decade to develop best practices for identifying those risks and protecting the markets from disruptions.  Finalizing these rules represents a collaborative effort and results in a principles-based approach for managing the risks in the technological revolution that continues to transform these markets.”

.@CFTC passes updates bankruptcy rules 5-0. @FIAconnect commented on the proposal: https://t.co/91hz0YzuZA

— FIAconnect (@FIAconnect) December 8, 2020

Lukken continued: “FIA also today appreciates the work of the commission and staff of the CFTC for working with the industry to finalize rules that reform the bankruptcy rules for FCMs and clearinghouses. The finalization of this rule, the first update in decades, will improve clarity for companies and transparency for the public.”

Source: FIA

Better Markets

Joseph Cisewski, Senior Derivatives Consultant and Special Counsel at Better Markets, issued the following statement with respect to the Commodity Futures Trading Commission’s (CFTC) finalized regulations governing electronic trading risks: “This morning, the CFTC finalized ‘new’ electronic trading regulations that will do almost nothing new to address electronic trading risks. In fact, the final regulations are largely redundant measures masquerading as meaningful action.

The “new” electronic trading regulations finalized by the CFTC today will do almost nothing new to address electronic trading risks.

The CFTC’s failure to address electronic trading risks leaves markets vulnerable to disruptive trading practices.https://t.co/VYThRZh19w

— Better Markets (@BetterMarkets) December 8, 2020

“During the open meeting, the CFTC staff and certain CFTC commissioners all but confirmed this reality, emphasizing an incredible belief that derivatives exchanges are already doing much, if not all, that is required to address electronic trading risks. Yet, the three-sentence, principles-based final regulations would leave numerous market structure frailties and electronic trading practices unaddressed and would not comprehensively address risks associated with electronic order origination, programming, transmission, and execution.

“Furthermore, the minimal regulations are only the latest CFTC actions to reveal a near obsession with industry self-policing. The rules essentially defer to for-profit exchanges to adopt, or not adopt, whatever electronic trading measures they deem reasonable. However, as we explained in our blog post and comment letter on the CFTC’s proposal, exchanges have shareholders and conflicts of interest that may constrain efforts to responsibly limit disruptive, but profitable, electronic trading practices.

“When the inevitable next Flash Crash occurs, the CFTC’s determination to knowingly leave numerous market structure frailties and disruptive trading practices unaddressed will be closely scrutinized. Hopefully, the CFTC responsibly changes course in 2021 and takes meaningful steps to address electronic trading risks before that happens.”

Source: Better Markets