Slower May Mean Pricier in Futures Markets

As CFTC considers restricting high-frequency futures trades by requiring a minimum resting time for orders, industry insiders say the change would drive up costs.

Slowing down the U.S. futures market by requiring that offers to buy and sell remain available for a minimum amount of time would hurt investors by driving up their costs, an industry trade group told the nation’s main derivatives regulator.

The Futures Industry Association (FIA) objected to such curbs in a comment letter yesterday to the U.S. Commodity Futures Trading Commission (CFTC), which had asked for input on reshaping the market. The regulator is considering restrictions on high-frequency trading, which involves computers capable of automatically placing orders in thousandths of a second or less.

About 92 percent of exchange volume in U.S. futures markets was executed electronically last year, according to the CFTC’s concept release. The industry is vulnerable to flawed algorithms and insufficient testing, according to the agency, which noted that CME Group, owner of the world’s largest futures exchange, fined a firm for inadequately supervising and testing controls.

The CFTC asked for information on a variety of topics, such as how market participants use news and data feeds, as well as social media, to construct their trading systems. It also asked how market participants currently gauge the quality of offers to buy and sell futures and how risks should be defined.

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