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August 28, 2020

The CFTC’s Misdirection on Electronic Trading Risks Leaves Derivatives Markets Vulnerable to Flash Crashes and Other Market Disruptions

Friday, August 28, 2020
Contact: Pamela Russell at 202-618-6433 or
Washington, D.C.  –  Joseph Cisewski, Senior Derivatives Consultant and Special Counsel at Better Markets, issued the following statement with respect to the Commodity Futures Trading Commission’s (CFTC) proposed regulations governing electronic trading principles:
“Electronic trading, while often beneficial to market quality, presents complex, varied and extensive risks to market integrity, orderly trading, fair competition and the price discovery process across derivatives markets.      
“Rather than thoughtfully addressing these risks, the CFTC has proposed largely redundant measures masquerading as meaningful regulatory action. In fact, the CFTC’s proposal is not only duplicative but dangerously close to deceptive, as we explain in our comment letter. The CFTC outlines essentially unenforceable measures that would do almost nothing new to address electronic trading risks and yet uses those minimal measures as pretext to withdraw the previously proposed Regulation Automated Trading, which would have taken useful initial steps to address electronic trading risks.
“Furthermore, in proposing this misleading framework, the CFTC reveals a near obsession with industry self-policing, practically deferring to the for-profit derivatives exchanges to adopt whatever measures they deem reasonable. In doing so, the CFTC only superficially discusses compromises that might be, and often are, made by exchanges to accommodate the firms most likely to pose electronic trading risks. Exchanges have shareholders and therefore conflicts of interest that may influence their efforts to responsibly limit disruptive, but profitable, electronic trading practices. 
“When the inevitable next flash crash occurs, the CFTC’s determination to proceed with a proposal that knowingly leaves numerous market structure frailties and disruptive trading practices unaddressed will be closely scrutinized. Hopefully, the CFTC responsibly changes course and takes steps to address electronic trading risks before that happens.”
Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit
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