86. Considering the broad deployment of automated trading systems across both equities and derivatives markets, the Commission seeks to understand the appropriate level of coordination between itself and the
87. Using the Flash Crash as an example, is it important to have identical definitions and remedies in the case of ATS and HFT registration requirements or do the existing market controls, such as circuit breakers, provide the necessary market protections in both the equities and derivatives markets? If the rules are not coordinated, what impact would this have on market interaction and oversight?
88. If trading venues apply mandatory functionalities to access derivatives markets, what benefit would a registration requirement provide to the Commission?
2. Market Quality Data
The Commission is inquiring as to the advisability of requiring each trading platform to provide market quality indicators for each product traded on its platform at a regular frequency. Some metrics of the type below are currently calculated by exchanges, often at an account level, and provided to market participants. Some metrics are currently used in aid of various exchange programs (such as order efficiency programs). Other metrics are not currently used but may, nonetheless, provide the Commission and the public potentially useful information.
The Commission envisions that increased transparency through the regular disclosure of market quality indicators will allow the Commission and market participants to better understand, among other things (1) The stability and efficiency of each market, (2) the degree of informed versus uninformed order flow, and (3) the nature and degree of liquidity in each market. In addition, the transparency provided by these metrics may better enable market participants to manage their ATSs in ways that further promote market stability and integrity.
The Commission is interested in receiving comment on the usefulness of various market indicators that could be prepared for each contract. The list of indicators would, for a given product and tenor, include measures of: (1) Effective spreads; (2) order-to-fill ratios; (3) execution speeds by order type and order size; (4) average aggressiveness imbalances; (5) price impact for given trade sizes; /104/ (6) average order duration; /105/ (7) order efficiency; /106/ (8) rejection order ratios; (9) net position changes versus volume; /107/ (10) branching ratios; /108/ (11) volume imbalance and trade intensity; /109/ (12) Herfindahl-Hirschman Indexes based on market share of open positions under common control; and (13) metrics on the number of price changing trades involving ATSs. /110/ Calculation methodologies for each of the measures would be consistent across exchanges in order to ensure compatibility and comparability across market venues. /111/
FOOTNOTE 104 The size of the price change that would occur if specific sizes of market orders were executed at that instant. END FOOTNOTE
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