The U.S. Commodity Futures Trading Commission (CFTC) is seekingcomment on whether to require registration for automated tradingfirms, taking a first step in potential restrictions on high-speedand algorithmic derivatives trading.

CFTC members voted unanimously to issue a conceptrelease that requests input on more than 100 questions,including on whether to expand testing and supervision ofhigh-speed trading strategies. The release, a step prior to aformal proposal by the top U.S. derivatives regulator, alsoconsiders ways to limit the maximum number of trading orders a firmcan place in a given amount of time.

“Traditional risk controls and system safeguards, many of whichwere developed according to human speed and floor-based trading,must be evaluated in light of new market realities,” CFTC ChairmanGary Gensler said in a statement.

The CFTC, along with the Securities and Exchange Commission(SEC), boosted scrutiny of high-frequency and algorithmic tradingafter May 6, 2010, when $862 billion in equity value was erased in20 minutes before share prices recovered. The agency's conceptrelease was debated for more than a year.

More recent computer malfunctions, including asoftware glitch that halted Nasdaq Stock Market trading inthousands of stocks and options for three hours on Aug. 22, haveraised questions about the reliability of electronic markets.

Scott O'Malia, a Republican CFTC commissioner, said in astatement that the input is necessary to understand protectionsalready in place and whether any additional steps are needed.

“In general, those involved in financial markets seem to haveblindly accepted that technology is almost always a good thing,”Bart Chilton, a Democratic CFTC commissioner, said in a statement.“But it doesn't work well enough if we continue to seeaberrations.”

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