08.02.2016

Ex-CFTC Regulator Opposes Agency’s Demand for Flash Boys’ Code

(This article first appeared on Bloomberg)

A former commissioner for the main U.S. overseer of derivatives said the agency should abandon controversial regulatory measures for high-speed traders until Hillary Clinton or Donald Trump is elected.

The Commodity Futures Trading Commission shouldn’t force traders to hand over records of their algorithmic trading procedures until after a new administration is chosen, said Bart Chilton, the former commissioner. Instead, regulators should finalize less disputed parts of a sweeping proposal to register and boost oversight of automated traders, according to Chilton. That will prevent a legal fight that’s likely to extend past November, he said.

“I would want to see what’s happening with the election” since the new administration may have a different set of priorities for the CFTC, said Chilton, who now works with high-frequency trading firms as a senior policy adviser at law firm DLA Piper. “It’s very likely that it would be litigated.”

While CFTC Chairman Timothy Massad has pledged that regulators will safeguard traders’ proprietary source code, firms from CTC Trading Group LLC to Intercontinental Exchange Inc. have expressed concern over increasing government access to the secret algorithms firms consider intellectual property. Regulators say they need the code to help determine what went wrong when markets crash.

The CFTC is still working on the rule and hasn’t given a date for when it will be finalized.

 

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