A. Pre-Trade Risk Controls
Potential pre-trade risk Party(s) to implement Substance of control control risk control 1a. Maximum Message Rate Market Participants 1a. Market participants (Message Throttle) Operating ATSs, Trading operating ATSs must Platforms, and Clearing establish a maximum Firms message rate per unit time for each ATS. This control should be calibrated to address the potential for unintended message flow (including orders) from a malfunctioning ATS. Market participants' systems must prevent the submission of messages in excess of the specified rate. Trading platforms' systems must prevent the acceptance of messages in excess of their own specified rates and must log instances when each ATS attempted to exceed such limits. Separately, trading platforms must establish systems enabling clearing firms to set rate limits directly at the trading platform. Trading platforms, clearing firms and market participants may set rates independently of each other. In all cases, human monitors must be alerted when limits are breached. 1b. Maximum Execution Market Participants 1b. Market participants Rate (Execution Throttle) Operating ATSs, Trading operating ATSs must Platforms, and Clearing establish a limit on the Firms maximum number of orders that each of their ATSs can execute in a given direction per unit time. The limit should be unique to each ATS and should be calibrated to address the potential for unintended executions arising from a malfunctioning ATS. Additional orders in excess of the limit should not be submitted or executed. Trading platforms must establish a maximum number of orders in the same direction they will execute per unit time from a uniquely identified ATS, and must prevent execution of trades that would violate this limit. Separately, trading platforms must establish systems enabling clearing firms to set per-customer message rate limits directly at the trading platform. Trading platforms, clearing firms and market participants may set rates independently of each other. 2. Volatility Awareness Market Participants Market participants Alerts Operating ATSs operating ATSs must implement automated solutions to immediately notify system supervisors when the prices of individual or groups of assets relevant to an ATS's trading strategies move either up or down by a given percentage within a predetermined period of time, or when the volume of individual or groups of assets relevant to an ATSs trading strategies over a specific period of time increase or decrease beyond a predetermined threshold. This control should help system supervisors identify market conditions which are not appropriate to the continued operation of a particular ATS or algorithm. The alert should be configurable by contract. 3. Self-Trade Controls Trading Platforms and All Trading platforms must Market Participants provide, and all market participants must apply, technologies to identify and limit the transmission of orders from their systems to a trading platform that would result in self-trades. 4. Price Collars Trading Platforms and All Trading platforms must Market Participants assign a range of acceptable order and execution prices for each of their products. All orders outside of this range would be automatically rejected, and orders already in the order book but outside of the acceptable range should not be elected by the matching engine. All market participants must establish similar product-specific price collars and should implement systems to ensure that orders outside of the collar are not transmitted to the relevant trading platform. 5. Maximum Order Size Trading Platforms, Trading platforms, Clearing Firms, and All clearing firms, and all Market Participants market participants must each establish default maximum order sizes for orders submitted, transmitted, or processed by their systems. A market participant's systems must prevent the submission of orders in excess of its internally-specified limits. A clearing firm's systems must prevent the transmission of customer orders in excess of its limits for that customer. Trading platforms must prevent their systems from processing or executing orders in excess of the limit specified by the trading platform. In addition, for DMA customers, trading platforms must establish similar systems enabling clearing firms to set per-customer order size limits directly at the trading platform. Limits set by market participants, clearing firms, and trading platforms may be different from, and operate independently, of each other. 6. Trading Pauses Trading Platforms Trading platforms would be required to institute trading pauses, similar in nature to stop-logic functionality, but covering a wider array of adverse states of an automated central limit order book. 7. Credit Risk Limits Trading Platforms, While some trading firms Clearing Firms and/or and FCMs conduct Market Participants post-trade credit checks Operating ATSs with varying degrees of latency and pre-trade credit risk screens are already required pursuant to Commission regulations, the Commission seeks public comments regarding any additional measures that could help protect the financial integrity of DCOs, as well as additional input from the public regarding the appropriate location and timing in the order lifecycle for credit checks.