The algorithmic trading is bound to be strengthened by the US Securities and Exchange Commission as the regulator's staff is now working on the development of a record keeping rule to monitor trading activities.
John Roeser, associate director in the market and trade division, said his staff will endorse to the commission a regulatory oversight over the algorithmic trading by enhancing its record keeping capability towards brokers and dealers. This recommendation will happen anytime this year, as per Reuters.
The practice on trading nowadays relies on the fast paced automation on complicated mathematical formulas with only minimal intervention from humans regarding decisions to either buy or sell. This technology has made trading cheap and efficient. But the problem is this automation can make mistakes and affect the trading market quickly.
Trading experts in the US and around the world are trying their best to work against this irregularities in the algorithms system. They all knew too well the risk involved in the financial market if this system fails. If it does then it will reveal their well-kept secrets in trading.
According to Tracy Mcdermott, acting Chief Executive at the Financial Conduct Authority, they have already made certain rules regarding the extension of the certification for them to have an absolute picture of the people that carry out certain wholesale activities, Automated Trader reported.
The Commodity Future Trading Commission is now ready with a new set of rules to avoid interference in the future market by imposing risk control guidelines and safeguards around the grading algorithms. The new rules will be open for public hearing within ninety days. This new regulations will affect trading firms, members and the actual exchanges as well.
Lexology noted that under the new rules, if the transaction will be made by a non-US personnel, this deal will count towards the non-US person's de minimis exception threshold from registration as a security-based swap dealer. This will only be applicable if the non-US person makes the transaction in a US branch/office or the non-US person is located in the United States.
Roeser stressed it is the duty of the SEC to be sensitive to the propriety nature of the firm's information. He added that these records should be available to the commission to provide the market with an oversight.
