The Commodity Futures Trading Commission (CFTC) has voted to set up a subcommittee on high frequency trading in a bid to better understand its effects on the market.
Since the flash crash of May 2010, HFT has been in the sights of regulators desperately trying to keep pace with technology that has fundamentally changed how markets operate.
The new subcommittee on automated and high frequency trading will begin with the basic task of developing a definition of HFT that will help in assessing its presence and impact in CFTC regulated markets and therefore the appropriate regulatory and policy responses.
The body will be chaired by CFTC chief economist Andrei Kirilenko and be part of the technology advisory committee led by commissioner Scott O'Malia. The watchdog is now asking for nominations as it seeks to find around 20 industry players to participate.
O'Maila has created four separate working groups; one will work on defining HFT within the context of automated trading systems; the second will examine whether or not there should be multiple categories of HFT; the third will focus on oversight, surveillance and economic analysis, to understand how HFTs behave as compared to other automated systems; and the fourth will address market micro structure issues to identify possible disruptions that might be provoked by automated trading systems.
"I think the Technology Advisory Committee through advice and guidance this new Subcommittee on Automated and High Frequency Trading will provide a much needed holistic approach to identifying the criteria the Commission needs to incorporate into any further decision making regarding automated trading and HFT," says O'Malia.