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ARTICLE · 03 JULY 2020

CFTC Proposes New Risk Principles For Electronic Trading

Mayer Brown
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On June 25, 2020, the US Commodity Futures Trading Commission (CFTC) voted to withdraw its proposed Regulation AT—which sought to regulate automated trading in a broad fashion...

United StatesFinance and Banking
Matthew F. Kluchenek
Matthew F. Kluchenek
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On June 25, 2020, the US Commodity Futures Trading Commission (CFTC) voted to withdraw its proposed Regulation AT—which sought to regulate automated trading in a broad fashion—and replace it with amendments to Part 38 of its rules to address the potential risk to a designated contract market's (DCM) trading platform arising out of a disruption due to electronic trading.1 The proposed risk principles espouse a more narrow and principles-based approach than Regulation AT.

Through the proposal, the CFTC seeks to prevent disruptions or anomalies such as excessive messaging by malfunctioning systems, “fat finger” orders or erroneous manual messages that result in unintentionally large or off-price orders, and the loss of connection between an order management system and the trading platform. Regulators have, on a number of occasions, brought enforcement actions involving these types of disruptions.

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