The Commodity Futures Trading Commission (CFTC) is on the path to finalizing Regulation Automated Trading (Regulation AT), which was proposed to enhance oversight of algorithmic trading in derivatives products. Recent growth in automated trading has improved efficiency, but has also raised some challenges – perhaps best illustrated by the May 2010 “flash crash."
The CFTC is deploying some standard tools in Regulation AT such as mandatory risk oversight, examinations, and compliance reporting. However, there has already been a strong industry response to some of the more controversial requirements – most notably, the ability for regulators to inspect repositories which routinely contain proprietary source code.
This Regulatory brief provides an analysis of the scope of trading and market participants affected by Regulation AT, the most significant requirements, and our expectations of upcoming developments.