Concept Release on Risk Controls and System Safeguards for Automated Trading Environments
U.S. derivatives markets have experienced a fundamental transition from human-centered trading venues to highly automated and interconnected trading environments. The operational centers of modern markets now reside in a combination of automated trading systems (``ATSs'') and electronic trading platforms that can execute repetitive tasks at speeds orders of magnitude greater than any human equivalent. Traditional risk controls and safeguards that relied on human judgment and speeds, and which were appropriate to manual and/or floor-based trading environments, must be reevaluated in light of new market structures. Further, the Commission and market participants must ensure that regulatory standards and internal controls are calibrated to match both current and foreseeable market technologies and risks. This Concept Release on Risk Controls and System Safeguards for Automated Trading Environments (``Concept Release'') reflects the Commission's continuing commitment to the safety and soundness of U.S. derivatives markets in a time of rapid technological change. The Concept Release serves as a platform for cataloguing existing industry practices, determining their efficacy and implementation to date, and evaluating the need for additional measures, if any. The Commission welcomes all public comments.