FIA.org –  FIA, along with the FIA Principal Traders Group (FIA PTG), expressed grave concerns regarding a critically important provision in the CFTC’s proposed supplement to its draft rules on automated trading. The supplement, passed today by a vote of 2-1 at a CFTC public meeting, would permit an unacceptable level of access to proprietary source code used to operate automated trading systems.

“The CFTC’s regulation of automated trading must focus on safeguarding markets through appropriate risk controls. We share the CFTC’s commitment to strengthening risk controls, and our members have actively supported improvements that market participants, intermediaries and exchanges can and should implement to prevent market disruption. We cannot support the proposed source code provision, however,” said Walt Lukken, president and CEO of FIA.

“We’re very disappointed that the Commission ignored the view expressed by a wide range of market participants as well as technology companies outside this industry that access to source code should require a subpoena,” Lukken added. “Source code deserves the same protections under the law as any other form of intellectual property. The proposed special call process simply does not meet that standard.”

A subpoena is enforced and administered through the federal courts, which provides protection against the abuse of power, enables firms to petition a neutral third party decision-making body, and ensures that legal concerns beyond CFTC’s enforcement remit are given full and appropriate consideration.

FIA and FIA PTG will be submitting formal feedback to the CFTC during the supplement’s public comment period. The two associations have submitted multiple comment letters to the CFTC on the proposed rules at earlier stages of the rule-making process (March 2016, June 2016, June 2016). The associations also have done extensive work on developing best practices for mitigating risk in automated trading, and have testified before Congress on this issue.