CFTC takes more steps to regulate commodity pools, high speed trading
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WASHINGTON, Feb. 9- The Commodity Futures Trading Commission (CFTC) today issued a final rule updating the regulations on registration and compliance obligations for commodity pool operators (CPO) and commodity trading advisors (CTA).
“The financial crisis, and now the collapse of MF Global, highlights the need for more accessible and effective customer protection measures,” said Commissioner Scott O'Malia in support of the final rule. “Indeed, our action today is supported by the SEC, which is reviewing the use of derivatives by investment companies.”
The rule increases transparency to the CFTC of CPOs and CTAs acting in the futures and swaps markets and enhances protections for their customers, according to CFTC. The rule passed 4-1 among the Commissioners and will be effective 60 days after publication in the Federal Register.
Commissioner Jill Sommers cast the only vote opposing the rule, saying that the approval gives a false impression of the CFTC's resources to monitor pools for systematic risk.
“The Commission justifies the new rules as a response to the financial crisis of 2007 and 2008 and the passage of Dodd-Frank,” said Sommers. “Yet there is no evidence to suggest that inadequate regulation of commodity pools was a contributing cause of the crisis, or that subjecting entities to a dual registration scheme will somehow prevent a similar crisis in the future.”
Also today, Commissioner Scott D. O'Malia, the chairman of the Technology Advisory Committee (TAC), announced that the CFTC will establish a Subcommittee on Automated and High Frequency Trading. The Subcommittee will be tasked with developing recommendations for the definition of high frequency trading (“HFT”), which use computer programs to take advantage of trade opportunities in fractions of a second. The definition is expected to help CFTC manage the impact of high frequency traders on the regulated markets.
O'Malia said he is looking for approximately 20 knowledgeable individuals to serve on the subcommittee. He said those interested in participating should submit their nominations to Andrei Kirilenko within 14 days after the noticed is published in the Federal Register.
Four separate working groups of the subcommittee will each be tasked with identifying specific issues associated with automated trading. The first group will define high frequency trading within the context of automated trading systems. The second group will examine whether or not there should be multiple categories of HFT. The third working group will focus on oversight, surveillance and economic analysis, to understand how HFTs behave as compared to other automated systems. The fourth working group will identify possible disruptions that might be provoked by automated trading systems and potential solutions.
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