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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,”…

See full article on Reuters

Chicago Fed calls for better risk controls on high-speed trading (Reuters)

* Says more controls would have helped contain losses from Knight glitch

* Finds firms fail to implement many risk controls in name of speed

* Calls for automated risk controls at every step in trade’s life cycle

Sept 17 The increasing number of technological snafus at exchanges and trading firms highlights the need for more stringent risk controls at all levels of the high-speed trading cycle, the Federal Reserve Bank of Chicago said on Monday.

See full article on Reuters