Commodity Futures Trading Commission December 17, 2015 – Federal Register Recent Federal Regulation Documents

The Commodity Futures Trading Commission (``CFTC'' or ``Commission'') is proposing a series of risk controls, transparency measures, and other safeguards to enhance the regulatory regime for automated trading on U.S. designated contract markets (``DCMs'') (collectively, ``Regulation AT''). The Commission's proposals build on efforts by numerous entities in recent years to promote best practices and regulatory standards for automated trading, including standards and best practices for algorithmic trading systems (``ATSs''), electronic trade matching engines, and new connectivity methods that characterize modern financial markets. In 2012 the Commission adopted rules requiring futures commission merchants (``FCMs''), swap dealers (``SDs''), and major swap participants (``MSPs'') to use automated means to screen orders for compliance with certain risk-based limits. It also adopted rules requiring certain financial risk control requirements for DCMs offering direct market access to their customers. In 2013 the Commission published an extensive Concept Release on Risk Controls and System Safeguards for Automated Trading Environments (``Concept Release''), compiling in one document a comprehensive discussion of industry practices, Commission regulations, and evolving concerns in automated trading.\1\ Now, through this notice of proposed rulemaking (``NPRM'') for Regulation AT, the Commission seeks to update Commission rules in response to the evolution from pit trading to electronic trading. In particular, the Commission is proposing to adopt a comprehensive approach to reducing risk and increasing transparency in automated trading. Proposed Regulation AT is designed to consolidate previous work by industry participants, the Commission, and fellow regulators into a unified body of law addressing automation in order placement and execution in U.S. derivatives markets. The Commission welcomes all public comments.