One market’s regulatory changes typically causes knock-on effects in other markets, just as events in the the futures market affected the equitiesmarkets during the May 2010 ‘flash crash’.
So when the U.S. Commodity Futures Trading Commission late last year voted 3-0 to propose Regulation Automated Trader, market participants outside the futures space should pay heed, according to Henri Pegeron, product manager, derivatives and U.S. compliance at Fidessa.
The proposed regulation seeks to establish a series of additional risk controls and transparency measures that will “enhance the regulatory regime for automated trading on U.S. designated contract markets,” the CFTC wrote in its Reg AT filing.
Portions of the regulator’s proposal would also would require “AT Traders” to register with the CFTC, establishing a regime for direct market access by future commission merchant clients, and the potential monitoring of algo-trading system from a source-code level.
As the regulatory net widens, “the more important it becomes for you to understand how you’ll be affected,” Pegeron said.
However, in many organizations the right hand doesn’t know what the left hand is doing, he added. Many equities desks want to know what is happening in the futures market and how it might affect them.
This why Fidessa established its own advisory service to address the needs of clients, prospective clients, and the industry in general.
“We go in agnostic to what a client’s situation might be, find a solution for the client, and make sure that they actually can navigate the landscape,” said Pegeron.”We point them in the right direction.”
He stresses that Fidessa’s offering is an advisory service rather than a consulting one.
“We are experts within the financial field and how the CFTC, European Securities and Markets Authority, and the Securities and Exchange Commission incorporate their rules, read their rules, enforce their rules and interpret the reading of their rules,” he said. “As part of it we consult, but we are not lawyers, so we cannot give clients a legal consultation. Most of us are not developers, so we cannot tell clients how to implement their software in a particular way.”
Although Fidessa has served tier-one and tier-two broker-dealers historically, the vendor also has branched out recently to support advanced proprietary-trading firms which have internal risk controls, limit checks, trading protocols, and trading algorithms that simply want direct market access to the futures exchange via their futures commission merchants, according to Pegeron.
“In that case why not use a solution like Fidessa,” he asked. “Proprietary traders do not need everything, but Fidessa is more than happy to entertain the idea of giving proprietary traders a solution.”