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, colocation, 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.”