In Pensions & Investments, Hedge Funds Partner Discusses A CFTC Proposed Enhanced Regulation of Algorithmic Trading

“Strateg[y], performance and cost” could potentially be affected if money managers decide to avoid or limit algorithmic trading, stated hedge funds partner Deborah Monson (Chicago) in a Aug. 8 article in Pensions & Investments. Recent efforts by the Commodity Futures Trading Commission (CFTC) to more closely regulate the use of algorithms for derivatives trades is causing some money managers to reconsider employing algorithm use entirely in their electronic trades. “The intent of Regulation Automated Trading, or Reg AT, when first introduced, was to create stability in the derivatives markets through regulation and transparency of algorithms, a code that uses advanced mathematical formulas to determine where and how to trade,” said Ms. Monson. Though the CFTC is still grappling with what the final rules will be, there is sufficient market uncertainty that some firms are already examining other options.