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REGULATION/LEGISLATION

CFTC commissioner: Agency needs to invest in derivatives trading oversight

CFTC Commissioner Scott O’Malia

A CFTC commissioner said the agency needs to invest more in technology to improve its surveillance of derivatives trading and plans to go to the traders themselves to seek their input.

“I do not believe that the (Commodity Futures Trading Commission's) systems are adequate to oversee today's fast and complex derivatives markets,” Scott O'Malia said Tuesday at a TABB Forum conference on derivatives in Chicago.

Mr. O'Malia said he was “tired of asking the commission” about proposals for a strategic technology plan, “so I am instead going to seek input from the exchanges, other self-regulatory organizations and high-frequency traders, who have invested millions of dollars in their own technology, for their thoughts on how the commission should design the 21st-century mouse trap to spot disruptive and manipulative trading practices — at any speed.”

Citing the rapid cancellation of orders mentioned in Michael Lewis' book, “Flash Boys,” Mr. O'Malia said the CFTC does not have an order message data collection and analysis system. Without one, he said, “How can the commission understand and make decisions about today's automated trading strategies? … We still have work to do. We need to improve our data collection.”

Mr. O'Malia said the commission's technology advisory committee will meet June 3 to discuss HFT issues.