WASHINGTON (Reuters) - The head of the U.S. derivatives regulator said on Wednesday he was scrapping a controversial Obama-era proposal that would have required algorithmic trading firms to hand their proprietary source code to the authorities.
Christopher Giancarlo, chair of the Commodity Futures Trading Commission (CFTC), said the agency did not have the resources to follow through with “Regulation AT” that would have brought potentially thousands of automated traders under CFTC oversight.
The rule, first unveiled in 2015 under the previous CFTC chairman but never finalised, caused uproar among the automated trading community, who said its requirement for firms to make their source code available to the authorities posed a major competitive risk.
The rule was drawn-up in the wake of the 2010 so-called Flash Crash that sparked fears about automated trading, in particular high frequency trading, represented a growing risk to the U.S. markets.
“My position was and continues to be that, while there were some good things in the proposal, there were other things that were unacceptable and perhaps unconstitutional, including that proprietary source code used in trading algorithms be accessible without a subpoena at any time to the CFTC and the Justice Department,” Giancarlo said on Wednesday in a speech at an event in Chicago.
Giancarlo, who voted against proposing the rule when he served as a CFTC commissioner, said on Wednesday he did not intend to advance it in its current form but that he was open to a discussion on how to potentially revise it.
Reporting by Michelle Price; Editing by Alistair Bell
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