Addressing The Need For Speed: CFTC Seeks Comment On Risk Controls For Automated Trading Environments

Summary: On September 12, 2013, the Commodity Futures Trading Commission ("CFTC" or "Commission") published a Concept Release on Risk Controls and System Safeguards for Automated Trading Environments ("Concept Release" or "Release"). In light of the fundamental shift from human-centered derivatives markets to highly automated and interconnected trading environments, and against the backdrop of several recent highly publicized market disruptions, the Release seeks to catalogue and obtain comment on the efficacy of existing risk controls in US derivatives markets. It also seeks comment on a variety of other risk-mitigating measures.

The Release highlights the current prominence of automated trading systems ("ATSs")—including high-frequency trading ("HFT") systems—that generate and route orders to markets that are themselves automated systems for the matching and execution of orders. The Release notes that while these systems have conferred many benefits upon