Deputy Secretary of the Commission.
Appendices to Concept Release on Risk Controls and System Safeguards for Automated Trading Environments
Appendix 1--Commission Voting Summary
On this matter, the following Commissioners voted in the affirmative: Chairman Gensler, Commissioner Chilton (with the concurrence set out below in Appendix 3), Commissioner O'Malia (with the concurrence set out below in Appendix 4), and Commissioner Wetjen. No Commissioner voted in the negative.
Appendix 2--Statement of Support of Chairman
We have witnessed a fundamental shift in markets from human-based trading to highly automated electronic trading. Automated trading systems, including high frequency traders, enter the market and execute trades in a matter of milliseconds without human involvement. Electronic trading makes up over 91 percent of the futures market. The swaps market also is moving toward electronic trading.
In our oversight of U.S. derivatives markets, both futures and swaps, the
The CFTC already has taken a number of important steps to keep pace with rapidly evolving 21st-century markets. We have adopted rules to implement pre-trade risk filters for futures commission merchants, swap dealers, designated contract markets and swap execution facilities. We also have new rules to prohibit disruptive trading practices and other market abuses.
In publishing this Concept Release, we are seeking public input on what additional risk controls and system safeguards are appropriate given this ever-changing technological environment. Traditional risk controls and system safeguards, many of which were developed according to human speed and floor-based trading, must be evaluated in light of new market realities.
Further, as sure as computers and programs have had technical glitches in the past, we must look to risk controls and system safeguards to protect markets when such glitches inevitably occur again. This Concept Release is intended to stir public discussion and debate on how best to protect the functioning of markets for the benefit of farmers, ranchers, merchants and other end users who rely on markets to hedge risk--particularly in light of the reality that the majority of the market is using automated trading systems.
Appendix 3--Concurrence of Commissioner
While I concur in the concept release, am most appreciative of the staff work, and am largely pleased at the result, this has taken far too long to come to fruition.
In general, those involved in financial markets seem to have blindly accepted that technology is almost always a good thing. Yet we continue to see major technology problems, like NASDAQ shutting down twice in as many weeks. Last year it was
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