Focus to limit risk from automated bond trading -CFTC official (Reuters)

Oct 21 Any proposals to tighten oversight on automated trading in U.S. Treasuries futures would focus on measures aimed at curbing risks that stem from bad algorithms and inadequate testing of the algorithms, a top U.S. regulator said on Wednesday.

In the wake of the “flash” rally in the Treasuries futures and cash markets on Oct. 15, 2014, when prices swung wildly within minutes in the absence of fundamental news, regulators have increased scrutiny on the growth of automated trading in the near $13 trillion sector.

“In the near term, we are focused on looking at operational risks, and taking steps to minimize the potential for disruptions and other operational problems that may arise,” said Timothy Massad, chairman of the Commodity Futures Trading Commission in a prepared speech on Treasuries market structure at the New York Federal Reserve.

Massad said he expects the CFTC, which regulates trading of U.S. futures, to introduce some proposed reforms on automated trading in Treasuries futures next month.

… Other proposals would pertain to the design, testing and supervision of automated trading systems as well as measures such as “kill switches,”…

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