[May 14, 2014]WASHINGTON (Reuters)
— The U.S. futures
regulator wants to weed out any unfair advantage speed traders may
have by getting sensitive information ahead of others, an official
said on Tuesday, as it weighs new rules for computerized trading.
The Commodity Futures Trading Commission was also looking at whether
it could get better market information by making computer-driven
trading firms meet the same regulatory requirements as so-called
floor traders.
"We want to make sure that in evaluating these markets, that the
information is readily available to all market participants," Vince
McGonagle, who heads the CFTC's division of market oversight, said
at Senate panel hearing.
Computer-driven trading has become a hot issue because of
best-selling author Michael Lewis's new book "Flash Boys," which
argues that stock markets are rigged in favor of a handful of
high-speed trading firms.
There are no rules specifically governing high-frequency trading, in
which firms dip in and out of markets in fractions of a second, but
the Department of Justice, the FBI, and financial regulators are now
looking into them.
The hearing by the Senate Agriculture committee, which oversees the
CFTC, was into whether the automated trading firms also posed a
threat for futures markets, used for instance by farmers to hedge
the value of their crops.
CFTC staff is considering whether to draw up rules for automated
trading after receiving comments from market participants on a
so-called concept release, often a first step towards new
regulations.
McGonagle did not say whether the agency had actual evidence that
high-frequency traders did have privileged access to information,
and said it was too early to say whether the CFTC would come out
with new rules.
"We need to do a thoughtful and diligent review ... to see whether
or where Commission action is warranted," he said.
Terry Duffy, the head of the CME Group Inc <CME.O>, the world's
largest futures exchange, said benefiting from minimal time
differences between exchanges - a core point of Michael Lewis's book
- was not possible in futures markets, where any contract always
only trades on one exchange.
But Andrei Kirilenko, a former chief economist at the CFTC, who has
extensively published about the issue in his current role as an
academic, said there were still problems.
"The public deserves much greater transparency about what's going on
inside these markets," Kirilenko said.
(Reporting by Douwe Miedema. Editing by Andre Grenon)
The Commodity Futures Trading Commission was also looking at whether
it could get better market information by making computer-driven
trading firms meet the same regulatory requirements as so-called
floor traders.
