The FIA Principal Traders Group and the FIA European Principal Traders Association today released their joint response to a consultation report issued by the International Organization of Securities Commissions seeking public input on the impact of technological changes on market integrity and efficiency.
The two groups emphasized in their response that principal traders have a vested interest in well-regulated markets and strongly support initiatives to provide regulators with the necessary tools to detect, deter and sanction fraudulent and manipulative behavior. The two associations also supported the deployment of robust risk management controls by participants, clearing firms and exchanges to protect the stability and integrity of the markets.
“Our members strongly believe that market integrity is not the exclusive responsibility of any one group of market providers or participants,” the groups said. “Rather, exchanges, clearing firms, trading firms, and regulators each have a role in ensuring fair and orderly markets. As noted in more detail in our response, proposed regulations and market structure reforms should carefully leverage the strengths of these constituencies.”
The two groups also urged IOSCO to recognize that technology has leveled the playing field for market participants and has provided a much higher degree of transparency for surveillance than historically available when the execution venue was a trading floor. The groups agreed that certain market structure refinements may be appropriate, but emphasized that the benefits of electronic trading—increased transparency, greater liquidity, tighter spreads, and reduced costs—must not be sacrificed.
The response specifically addressed a number of questions posed in the IOSCO consultation report and commented on IOSCO’s analysis of several topics, including algorithmic trading, market fragmentation and dark liquidity, direct electronic access, co-location, tick sizes, fee structures, and high-frequency trading.
“One of the reasons we formed the FIA Principal Traders Group was to provide regulators with our perspective on the effects of technology on exchange-traded markets,” said Don Wilson, Chairman of FIA PTG. “We are pleased to have the opportunity to respond to the IOSCO consultation and look forward to continuing our dialogue.”
“Academic and industry research overwhelmingly support the important role of electronic liquidity providers in today's marketplace including those who employ tools such as algorithmic and high-frequency trading,” said Remco Lenterman, Chairman of FIA EPTA. “We caution regulators against basing regulations on evidence that is merely anecdotal.”
For more information contact Will Acworth at +1 202 772 3034 or wacworth@futuresindustry.org. The full text of the IOSCO Response is attached and is available at http://www.futuresindustry.org/downloads/FIAResponsetoIOSCOImpactofTechnologicalChanges081211.pdf
FIA Principal Traders Group was founded in January 2010 and is comprised of 34 principal trading firms. The purpose of the organization is to provide a forum for firms trading their own capital to identify and discuss issues confronting the PTG community; define common positions on public policy issues and advance the group’s collective interests through the FIA; improve public understanding of the constructive role played by the wide variety of individual trading groups in the exchange‐traded derivatives markets; and promote cost‐effective, transparent access to U.S. and non‐U.S. markets. More information on FIA PTG including a list of members is available on its website at http://www.futuresindustry.org/ptg/.
The FIA European Principal Traders Association was founded in June 2011 and is comprised of 19 principal trading firms. The mission of the FIA EPTA is to support transparent, robust and safe markets with a level playing field for all market participants. The group will work to define common positions on public policy issues, improve the public’s understanding of the constructive role played by principal trading groups in the exchange‐traded markets and promote cost-effective, equal and transparent access to European markets. More information on FIA EPTA including a list of members is available on its website at http://www.futuresindustry.org/epta/.
The Futures Industry Association is the leading trade organization for the futures, options and over-the-counter cleared derivatives markets. Its membership includes the world’s largest derivatives clearing firms as well as leading derivatives exchanges from more than 20 countries. More information on the FIA is available on its website at http://www.futuresindustry.org/default.asp.