Derivatives associations urge CFTC to split RegAT

FIA and ISDA urge the CFTC to divide up RegAT and rethink rules on source codes.

Trade bodies representing the largest US derivatives traders has urged the Commodity Futures Trading Commission (CFTC) to split regulation on automated trading (RegAT).

In a joint letter to the derivatives watchdog, the bodies including the Futures Industry Association (FIA), International Swaps and Derivatives Association (ISDA), and the Managed Funds Association (MFA), has called for the regulation to be split, focusing on pre-trade risk controls and separate legislation on algorithms.

“The Group urges the CFTC to separate the rulemaking, focus on pre-trade risk controls and continue diaglogue with the industry on remaining portions of RegAT,” the letter says.

The CFTC has received industry-wide criticism over the provision that algorithmic traders will be required to provide their source codes to the regulator without a subpoena.

The associations have unanimously supported a “principle-based retention policy”, arguing “a mandated, prescriptive source code retention requirement may require market participants to embark on an extremely complex and risky project to move existing source code repositories from set of tools to another.”

They also proposed definitions for source code, and a set of best practices for maintaining and tracking changes to source code to be included in the retention policy.