WASHINGTON -(Dow Jones)- Experts on high-frequency and algorithmic trading will discuss what kinds of regulations may be appropriate for the industry at a technology advisory committee meeting being held by the Commodity Futures Trading Commission Wednesday.
Wednesday will mark the first meeting of this new technology committee since it was re-established by the federal futures regulator a few months ago. The meeting comes as the CFTC and Securities and Exchange Commission continue to probe the possible causes behind the May 6 "flash crash," when the market plunged before staging a partial recovery.
Among the factors the CFTC and SEC have cited as possible contributors to the plunge include the withdrawal of liquidity providers like high-frequency traders from the market. The CFTC is also looking to see if a computer algorithm may have played a role after it executed a large sell order for E-mini Standard & Poor's 500 futures contracts.
Wednesday's meeting will feature several experts, including the CFTC's own economist Andrei Kirilenko, who is conducting research on high-frequency trading. Other members of the committee will include Richard Gorelick of RGM Advisors LLC and a representative from the Futures Industry Association who will present a paper on market access risk management recommendations.
Kirilenko will discuss a theoretical paper that seeks to uncover whether or not high-frequency traders in the E-mini futures contract can help moderate prices swings like those seen on May 6.
"This new committee can play a vital role assisting the commission's efforts to better oversee the evolution of the derivatives markets," said CFTC Commissioner Scott O'Malia, who will be the head of the advisory committee.
Even prior to the flash crash, the SEC and CFTC had both begun looking more closely at high-frequency trading as part of a broader review of market structure issues. Some have raised concerns that high-frequency traders, who execute transactions at lightening speeds, may have unfair advantages over other market participants.
O'Malia is hoping members of the committee will submit papers on a number of issues, including what kinds of impacts high-frequency and algo trading have on markets and what sorts of proposed regulations or industry best practices should be considered. Other topics that may be explored include technological challenges for these traders and what kind of data they have at their disposal compared with other market players.
Copyright 2009 Dow Jones Newswires
CFTC, SEC Draft Summary On ‘Flash Crash’ Focuses On 6 HypothesesWall Street crash draws spotlight to vagaries of speed trading
