CFTC head says HFT not rigging futures, but will take another look

April 5, 2014 04:02 PM

The U.S. Commodity Futures Trading Commission is reviewing futures markets to ensure high-speed trading isn’t violating the law, acting CFTC Chairman Mark P. Wetjen told reporters in Washington today.

“I don’t have the impression at the moment that futures markets are rigged,” Wetjen said on the sidelines of a CFTC meeting. He was responding to comments by Michael Lewis, author of the book “Flash Boys,” that investors are being robbed by traders using advanced computers to jump ahead of their trades.

The CFTC and its enforcement division are reviewing trading practices in the futures market to ensure they aren’t manipulative, Wetjen said. The agency is also reviewing relationships between exchanges and trading firms, he said.

The CFTC joins the Federal Bureau of Investigation, Securities and Exchange Commission and New York Attorney General’s office in probing high-speed trading. Authorities are examining practices in which firms use super-fast computers to post and cancel orders at rates measured in thousandths or even millionths of a second to capture price discrepancies.

The SEC has investigations under way that involve high- frequency trading and is “on top of” the concerns, SEC Chair Mary Jo White said at a congressional hearing on April 1.

The CFTC has also proposed a so-called concept release, a step prior to rulemaking, to consider new controls for high- frequency trading designed to increase market stability.

Wetjen said the agency is looking into matters that have been brought to its attention to determine whether there are things being done that violate federal statutes.

“I think that’s a little bit different than making a statement about the futures markets as a whole that they’re rigged,” he said today. “Frankly in full disclosure, the more we dive into this maybe we’ll come to that conclusion, but I’m certainly not in a position to say that right now.”

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