Comment Text:
The George Washington University Regulatory Studies Center strives to improve regulatory policy through research, education, and outreach. As part of its mission, the Center conducts careful and independent analyses to assess rulemaking proposals from the perspective of the public interest. This comment on the Commodity Futures Trading Commission’s Concept Release on Risk Controls and System Safeguards for Automated Trading does not represent the views of any particular affected party or special interest, but is designed to evaluate the effect of the Commission’s proposal on overall consumer welfare.
Two documents are attached together below for the Commission’s consideration. The first is an op-ed on the Concept Release, arguing that high-speed automated trading can make markets less efficient because it opens opportunities for costly “racing,” even while it is improving market efficiency in other ways.
The second document is a Working Paper that goes into more detail on the racing mechanism and its relationship to information asymmetry, which is affecting the performance and stability of continuously trading financial markets around the world, and that also explores a possible remedy, the use of temporal buffers to govern the pace of trading.
(Please see attached file)
