(Adds detail on Senate hearing, from speech)
WASHINGTON May 6 (Reuters) - The U.S. derivatives regulator is working on a proposed rule for computer-driven trading, a commissioner at the agency said on Tuesday, after the agency asked market participants for insights on a long list of issues on the controversial practice.
Staff at the Commodity Futures Trading Commission, which oversees derivatives trading as well as futures and swaps markets, is working on a proposal based on a study last year on risk controls and safeguards for automated trading systems, on which it has requested public comment.
"I understand that commission staff is starting to work on a proposed rule," Commissioner Scott O'Malia said in a speech at a conference in Chicago.
Separately on Tuesday, a Senate panel said it would hold a hearing next week on high-frequency trading and other forms of automated trading in futures markets to see how the CFTC can keep the market safe.
Computer-driven trading has again become a hot topic following publication of the book "Flash Boys," by best-selling author Michael Lewis, who argues that equity markets are rigged in favor of high-frequency traders.
Many banks and hedge funds use sophisticated computer programs to send large batches of orders into equity and futures markets in fractions of a second, a practice known as high-frequency trading.
Proponents of HFT say the firms make it easier for other buyers and sellers to meet each other in the market, but critics argue it can cause sudden market crashes and easily mask market manipulation or other illegal activity.
Futures markets are also a common hunting ground for speed traders, and the CFTC is probing them to see if they are breaching CFTC rules
The agency in September also put out a so-called concept release on computerized trading, which was seen as a possible first step toward drawing up formal rules.
The Senate Agriculture Committee, which oversees the CFTC, said it would call the meeting on May 13 and said it would disclose a list of witnesses at a later stage. (Reporting by Douwe Miedema; Editing by Steve Orlofsky and Leslie Adler)