Energy Metro Desk Article "Drums along the Potomac" Discusses O'Malia's Committee on High-Frequency Trading (with Lofchie Comment)

Linked below is an article featured in the Energy Metro Desk series, "Drums along the Potomac," which examines a shift in the discussion regarding high-frequency trading ("HFT") at the recent CFTC Technology Advisory Committee ("TAC").

According to the article, rather than discussing how to shut down HFT, participants in the TAC meeting shifted the conversation toward "new calls for more sophisticated pre-trade risk controls." CFTC Commissioner Scott O'Malia stated that the TAC has been researching the matter thoroughly in order to assess what gaps there might be in policy and risk management surrounding HFT. According to O'Malia, "This is the benefit of principles-based regulation. It can evolve right along with whatever technology the market leverages next."

Lofchie Comment: Witnesses at the recent House hearings on the National Market System established by Section 11A of the Securities Exchange Act also discussed whether policy-based regulation would be more effective as a means of regulating securities trading, as opposed to our existing prescriptive (detailed rules) structure. While policy-based regulation can be criticized for its ambiguity, prescriptive structures do not work well in dynamic environments, as government regulations cannot keep pace with rapid technology and market changes.

Click here to view the article.The above link is an excerpt from the most recent issue of Energy Metro Desk, which is published biweekly by Scudder Publishing Group, an energy trade news publishing company based in the Washington, D.C. metropolitan area. Those interested in learning more about Energy Metro Desk may do so by linking to www.energymetro.com or emailing [email protected]. Reprinted with permission of the publisher, Scudder Publishing Group, LLC. Copyright 2014.

Related news: CFTC Holds TAC Meeting Regarding SEF Issues (with Delta Strategy Group Summary) (February 12, 2014); CFTC Holds TAC Meeting Focusing on SEF Issues (with Lofchie Comment) (February 10, 2014).