Buy-side Perspectives Issue 3 - Page 21

News roundup With new regulations products, technologies, US regulator CFTC proposes ‘Regulation AT’ companies and developments ongoing all the time, the world of buy-side trading is an The US Commodity Futures Trading Commission has approved a set of ever-changing landscape. Here’s a quick proposed rules for automated trading which will require risk controls, round up of some of the news stories you transparency measures and safeguards on automated trading in the US, may have missed over the last few weeks. starting from 2017. UK regulator PRA releases MiFID II proposals British financial services regulator the Prudential Regulation Authority has published proposed rules to implement MiFID II into UK law. The proposals include special provisions on algorithmic trading. The FCA has stated that in general, its proposals are in line with what was proposed by the FCA in December 2015, but with a focus that more reflects the PRA’s role in the area of ensuring the safety and soundness of the firms themselves, rather than preventing market abuse or disorderly conduct. The PRA has specified that as part of the new rules, firms that use algorithmic trading must ensure their systems are resilient and have “sufficient capacity”; they must also use appropriate thresholds and limits and prevent the sending of erroneous orders or contribute to a disorderly market. Under the PRA’s proposed rules, a firm’s algorithmic trading systems must be fully tested and “properly” monitored. Firms will have additional recordkeeping requirements if they use high-frequency trading, and will have other requirements if they provide direct electronic access to trading venues. The PRA has said it will accept comments on its proposed rules until 27 May 2016. Under the proposed rules, risk controls are to be introduced for market participants that use algorithmic trading systems, who are now defined as ‘AT persons’. The rules also apply to clearing member futures commission merchants (FCMs) with respect to their AT Person customers, and DCMs executing AT Person orders. The proposed rules are intended to reduce potential risks arising from algorithmic trading ac ]