B. Post-Trade Reports and Other Post-Trade Measures
Potential Party(s) to Substance of report or measure post-trade implement report or report or measure measure 8. Order Trading Trading platforms must provide a duplicate Report platforms copy of each order to the originating market (Post-order participant and to the market participant's drop copy) clearing firm(s) simultaneously with such order's receipt by the trading platform. 9. Trade Trading Trading platforms must provide a duplicate Report platforms copy of each executed trade to the (Post-trade originating market participant and to the drop copy) market participant's clearing firm(s) simultaneously with such trade's execution by the trading platform. 10. Position DCOs DCOs must provide net position per maturity Report per contract to the originating market (Post-clearing participant and the market participant's drop copy) clearing firm(s) as soon as the contract is matched at the clearinghouse. 11a. Uniform Trading 11a. Trading platforms must establish Adjust or Bust platforms and policies for adjusting the price of trades or Error Trade All Market breaking trades that have been executed due Policies Participants to an error. Policies must favor price adjustments rather than trade cancellation. To the extent possible, policies must require decisions by the trading platform to be made on the basis of readily available objective criteria in order to facilitate rapid or immediate decisions. 11b. 11b. Market participants must report error Standardized trades to the trading platform within five Reporting minutes after the trades are executed. Window for Trading platforms must notify market Error Trades participants of a potential adjust-or-bust situation immediately. Trading platforms must make a decision and notify market participants of that decision within a specified period of time.
C. System Safeguards
Potential system Party(s) to Substance of safeguard safeguard implement safeguard CONTROLS OVER ORDER Trading Trading platforms, clearing members, and PLACEMENT Platforms, market participants must have systems and Clearing processes in place to: Firms, and All Market Participants Order Cancellation Capabilities 12a. Auto-cancel on 12a. Exchanges should implement a flexible disconnect system that allows a user to determine whether their orders should be left in the market upon disconnection. This should only be implemented if the clearing firm's risk manager has the ability to cancel working orders for the trader if the trading system is disconnected. The exchange should establish a policy whether the default setting for all market participants should be to maintain or to cancel all working orders. 12b. Selective 12b. Immediately cancel one, multiple, or working order all resting orders from a market cancellation participant as deemed necessary in an emergency situation. 12c. Kill switch 12c. Immediately cancel all working orders, and the ability to prevent submission (market participant), transmittal (clearing member), or acceptance (trading platform) of any new orders from a market participant, or particular trader or ATS of such market participant. 13. Repeated 13. Market participants operating ATSs Automated Execution must establish a limit on the maximum Throttle number of orders that each ATS can submit. When an ATS reaches that maximum it must be automatically disabled until a human re-enables it. 14. System 14. Trading platforms must provide, and heartbeats (see market participants operating ATSs must section III.E.1.a utilize, heartbeats that indicate proper and footnote 90) connectivity between the trading platform and the ATS. Such heartbeats must also indicate the status of connectivity between an ATS and any systems used by the trading platform to provide the ATS with market data. If connectivity to any system is lost, the ATS should be disabled, and resting orders should be maintained or cancelled based on the pre-determined preferences of the firm that lost connectivity. POLICIES AND Market 15a. Market participants operating ATSs PROCEDURES FOR THE Participants must properly design their systems to DESIGN, TESTING, Operating avoid violations of the CEA, Commission AND SUPERVISION OF ATSs regulations, or DCM and SEF rules related ATSs to fraud, disruptive trading practices, 15a. ATS Design manipulation and trade practice violations. They must also ensure that their ATSs include all applicable pretrade risk controls and system safeguards as described herein. 15b. ATS Trading 15b. Trading platforms and market Development and Platforms participants operating ATSs must maintain Change Management and Market a development environment that is Participants adequately isolated from the production Operating trading environment. The development ATSs environment may include computers, networks, and databases, and should be used by software engineers while developing, modifying, and testing source code. Firms must maintain a source code repository to manage source code access, persistence, and changes. Firms must establish and document procedures for communicating the functionality and requirements of, and changes to, their proprietary software. These procedures must include an audit trail of material changes that would allow them to determine, for each change: Who made it, when they made it, and what the purpose was for the change. Firms must have documented policies and procedures that allow representatives from trading, risk, and software management to approve changes and to verify internal testing before a new or modified trading system can be enable in production. 15c. ATS Testing Trading 15c. Market participants operating ATSs Platforms must test each ATS both internally and on and Market each trading platform on which an ATS will Participants operate. Relevant tests include, but are Operating not limited to, unit testing, functional ATSs testing (both integration and regression testing), non-functional testing, and acceptance testing. Functional testing must include all applicable pre-trade risk controls, post-trade reports and other measures and system safeguards. Non-functional testing must include testing under stressed market conditions. Market participants must perform such testing on each algorithm prior to initial deployment, and prior to re-deployment, after certain modifications to the algorithm. Trading Platforms must provide test environments that simulate the production trading environment so that market participants may conduct exchange-based conformance testing on their ATSs once they have completed internal testing. Conformance testing must include tests for all ATS risk mitigation controls that are able to be tested by the exchange. Exchange-based conformance testing must be done after certain modifications to the operating code. 15d. ATS Monitoring Market 15d. Market participants operating ATSs and Supervision Participants must ensure that their ATSs are subject to Operating continuous real-time monitoring and ATSs supervision by trained and qualified staff at all times while engaged in trading. Appropriate supervision includes automated alerts when ATS order behavior breaches design parameters or when market conditions diverge from program expectations. It also includes automated alerts upon loss of network connectivity or data feeds. Monitoring and supervision staff must have the ability and authority to disengage the ATS and to cancel resting orders when system or market conditions require it, including the ability to contact trading platform staff to seek information and cancel orders. They must also have acceptable dashboards and control panels to monitor and interact with the ATS. Monitoring and supervision staff must record the time when they assume responsibility for an ATS and the time when they relinquish control to others. Recording must be achieved through distinct log-ins to the required control panel by each staff person. Log-in must also be subject to access controls that ensure the correct staff person is identified. 15e. Training for Market 15e. Firms operating ATSs must develop ATS Monitoring Participants training for all staff involved in Staff (see section Operating monitoring or designing ATSs. Training III(E)(2)(b) and ATSs must, at a minimum, cover design footnote 97) standards, event communication procedures, and requirements for notifying exchange and commission staff when risk events occur. Additionally, each firm must develop, document, and implement training policies that ensure human monitors are adequately trained for each new algorithm that is implemented. Training must include, at a minimum, the economic rationale for the algorithm and mechanics of the underlying process, as well as the automated and non-automated risk controls that are applicable to the algorithm. 15f. Crisis Trading 15f. Trading platforms and market Management Platforms participants operating ATSs must develop Procedures and Market and document procedures that direct the Participants actions of ATS supervisors, exchange Operating trading monitors, and support staff in the ATSs event that an algorithm malfunctions or responds to market signals in an unanticipated manner. Procedures should direct the process for evaluating, managing, and mitigating market disruption and firm risk. The procedures should also specify people to be notified in the event of an error that results in violations of risk profiles or potential violations of exchange or Commission rules. SELF-CERTIFICATIONS AND NOTIFICATIONS 16a. Market 16a. All firms operating ATSs must certify Self-Certification Participants annually that their ATSs individually and and Clearing Firm Operating collectively (i.e. at the algorithm, Certification ATSs account, and firm levels) comply with all Commission and trading platform requirements regarding pre-trade risk controls and post-trade reports and other measures, as well as all applicable risk controls. Clearing firms must institute reasonable measures to confirm that their client trading firms implement the pre-trade risk controls that are required. 16b. Risk Event Market 16b. Market participants operating ATSs Notification Participants must notify the exchange, and the exchange Requirements Operating must notify the Commission whenever an ATSs, algorithm violates its design parameters Trading or whenever risk control technologies or platforms processes do not function as planned even if they do not result in destabilization of the markets. The exchange must also notify the Commission whenever any of its own risk management technologies or processes violate design parameters or do not function as planned. 17. ATS or Market A unique identifier would be assigned to Algorithm Participants each ATS or algorithm, and all orders Identification Operating submitted by that ATS or algorithm would ATSs be tagged with the identifier. 18. Data Market All firms operating ATSs must have Reasonability Participants "reasonability checks" on incoming market Checks Operating data and other data (including social ATSs media).