Financial Regulatory Forum

EXCLUSIVE-CFTC has looked into high-frequency trading, wants fair access

By Reuters Staff
October 21, 2009

By Jonathan Spicer
CHICAGO, Oct 21 (Reuters) – The Commodity Futures Trading Commission has looked into the growth of high-frequency trading in U.S. futures markets, Chairman Gary Gensler said in an interview on Wednesday.

Gensler said the regulator wants to ensure all participants have fair access to markets amid trading speed and technological changes, and that the CFTC is wary of this in adopting new regulations.

The CFTC “has taken a look at this and has continued to work with the exchanges to ensure that, in our modern technological times, that all participants have a fair access to the markets,” Gensler told Reuters TV on the sidelines of the Futures Industry Association conference here.

Just as the U.S. Securities and Exchange Commission has looked at high-frequency trading in securities markets, Gensler said, “we have continued to look at futures markets to ensure that basic goal, even in this concept of high-frequency and technological times.”

The SEC is looking into the lightning-fast trading technique where sophisticated banks, hedge funds, and independent proprietary shops use algorithms to arbitrage and make markets. It remained one of the most profitable lines of business through the financial crisis.

The SEC aims to publish a concept release this year on high-frequency trading, which some say creates an unfair marketplace. It is estimated to be involved in up to 40 percent of overall U.S. futures volume and up to 70 percent of U.S. equities volume.

“It’s a reality that technology will continue to change and that markets will continue to change, and time cycles will get shorter,” Gensler said. “The question is how do we adopt our regulations to ensure that the investing public is protected.”

(Reporting by Jonathan Spicer; Editing by Richard Chang) ((jonathan.spicer@thomsonreuters.com; Reuters Messaging: jonathan.spicer.reuters.com@reuters.net))

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