FOA issues guidance on controls in European electronic markets
First Published 20th September 2012
In a bid to show that the industry can do a good job regulating itself, the Futures and Options Association provided guidance that it said was intended to complement ESMA's guidelines on controls in electronic trading.
London - In a year dominated by nagging regulatory uncertainty, trading mishaps and exchange glitches, the Futures and Options Association has unveiled a guidance document that it said was intended to complement guidelines issued by ESMA on systems and controls for automated trading.
"This industry is fluid, dynamic and innovative. Our intention has been to deal with the concerns within the industry, among regulators and politicians, and the general public in a way which protects market integrity without stifling a successful and beneficial industry," said Paul Marks, chair of the FOA's E-Trading/Risk Working Group and the EMEA Head of Electronic Execution, Listed Derivatives Products at Citi.
Blake Stephenson, regulation manager at FOA, said the group has been talking with legislators and member state regulators about issues posed by electronic market environments and is looking to use the guidance for continuing the dialogue.
"With this document the FOA has taken meaningful action to help the industry to implement a key objective of regulators, which is to secure the safety and resilience of European electronic market environments," Stephenson said.
The FOA said it recognised widespread concerns associated with high-frequency and automated trading and it supports regulatory focus on the stability and integrity of European markets. It was in that context, the FOA said, that it supported ESMA's guidelines which came into force in May.
The group said that in recognition that European listed
derivative markets are largely electronic, its guidelines address
electronic markets. "This is intended to be broader than
high-frequency trading, algorithmic trading or even automated
trading issues. We consider this approach is necessary to ensure
that systems and controls across the market are sufficiently
The guidance has four objectives: 1) to establish a standard for members to judge how appropriate their control environments are in relation to ESMA guidelines; 2) to clarify market participants' obligations to one another, to regulators and to the market; 3) to establish examples of documentation required between industry particpants to ensure markets operate safely and efficiently; and 4) to explain how the industry is implementing the ESMA guidelines to ensure control environment are appropriate for minimising risk from electronic trading.