| NEW YORK
NEW YORK Oct 23 The head of the U.S.
commodities regulator said on Tuesday that he is working on a
broad package of proposals for possible new rules governing high
frequency trading, which has been blamed for increasing market
Commodity Futures Trading Commission Chairman Gary Gensler
said he had a designed a broad package of potential rules, which
address some of the dangers of high-speed trading, and he hoped
to put it before the commission "shortly."
"We've seen our markets change quite fundamentally in terms
of the participation," he said, adding that market participants'
direct electronic access to exchanges had changed the
composition of the marketplace from one dominated by noisy
humans to a silent space in which machines can complete trades
in less than a second.
"As regulators, we owe it to the American public to try to
stay abreast of that," Gensler said, speaking on the sidelines
of the Securities Industry and Financial Markets Association's
This broad package, known as a concept release, is designed
to initiate a public debate. Based on feedback the CFTC will get
when it publishes the concept release, the agency may then move
to propose new rules.
The Securities and Exchange Commission took that step more
than two years ago, publishing a concept release on high-speed
trading that included proposals for a "trade-at" rule, which
would require stock market participants to carry out trades at
the best price published in any one of the many stock trading
High-speed trading has been blamed for recent volatility in
the stock markets, including large price swings over very small
periods of time in individual stocks, as well as massive market
events like the 2010 "flash crash."
The SEC established new controls on stock trading following
the flash crash.
But high frequency traders operate in markets other than
stocks. A March 2010 letter, the Chicago Federal Reserve Bank
warned the SEC that "high frequency trading practices ... have
implications for risk management at clearing houses."
The Chicago Fed's letter pointed out that since high
frequency trading happens so quickly, most derivatives positions
taken by high frequency firms aren't held overnight and are
therefore not subject to the same, protective collateral
requirements other market participants must meet.
"This strikes us as imprudent," the letter said.
Gensler offered few details on the contents of the concept
release, but said it will contemplate whether there should be
more pre-trade filters in place, and whether testing and
supervision of trading programs should be required.