66. What types of risk events should trigger reporting requirements, and what entities should receive risk event notifications from market participants operating ATSs?
67. Which entities should receive risk event notifications?
4. ATS or Algorithm Identification
The Commission is considering measures to improve the identification of ATS or their underlying algorithms in messages generated by ATSs. The Commission believes that identification of ATSs or underlying algorithms could help both firms and trading platforms to more quickly identify malfunctioning systems that could disrupt markets. Fuller identification of automated systems may also improve oversight by the Commission, including the ex post analysis of disruptive events aimed at preventing or mitigating similar recurrences.
The Commission is aware of the inherent complexity in any ATS or algorithm identification system and seeks public comment on this potential measure. Specific questions of interest to the Commission include:
68. Should the Commission define ATS or algorithm for purposes of any ATS identification system that may arise from this Concept Release? If so, how should ATS or algorithm be defined? Should a separate designation be reserved for high frequency trading algorithms and if so, what is the threshold difference?
69. What are the existing practices within trading firms for internally identifying ATSs or algorithms and for tracking their performance, including profit and loss? What elements of existing practices could be leveraged in any ATS or algorithm identification system proposed by the Commission in the future?
70. The Commission understands that an ATS may consist of numerous algorithms, each of which contributes to a trading decision. If an algorithm-based identification system is proposed, which of the potentially multiple algorithms that constitute an ATS should carry the ID? In addition, what degree of change to an algorithm should necessitate the use of a new ID, and how often does this change typically occur? What is the appropriate definition of "algorithm" for purposes of an algorithm identification system?
71. If the identification system resides at the ATS level, how should such IDs be structured to ensure that they are nonetheless sufficiently granular to identify components that may be leading or have led to unstable market conditions?
72. What message traffic between an ATS and a trading platform should include the ATS or algorithm ID (all messages, orders only, etc.)?
73. What relationship should this ATS ID have to the legal entity identifier (LEI)?
5. Data Reasonability Checks
The Commission is interested in the range of information sources used by ATSs to inform their trading decisions, and in how market participants form reasonable beliefs as to the accuracy of such data. For example, following recent media reports regarding the adverse market impact of false information distributed through unauthorized use of a social media outlet used by the
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