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Comment for Proposed Rule 80 FR 78824

  • From: Peter Schwartz

    Comment No: 60580
    Date: 1/11/2016

    Comment Text:

    Regulation AT

    A Kill Switch for the Natural and Inalienable Rights

    A “kill switch” triggered on spikes in volumes alone, and neglects regulatory capital requirements, may at times obstruct the firm's natural right to profit when the algorithm may actually be capitalizing on the extraordinary set of circumstances which would maximize profits for the HFT investor. Has it been documented how those investors will be made whole if an algorithm is turned off due to a spike in profitable trading?

    Thomas Jefferson’s use of the “life, liberty and the pursuit of happiness” was inspired by the writings of the English philosopher John Locke wrote that governments are instituted to secure people's rights to “life, liberty, and property.”

    Regulation AT in its current state will “secure the right to property” the following manner:

    “Add compliance, reporting and registration requirements, and establishes designated contract market (“DCM”) and registered futures association (“RFA”) review programs. These additional requirements will certainly increase costs to all market participants engaged in Algorithmic Trading that are subject to this proposal.”

    Suspends the algorithm based on volume even though profits may be maximized.

    Creates “a source code repository for algorithms and make it available for inspection to any representative of the Commission or the U.S. Department of Justice for any reason.Currently, the federal government may only obtain such sensitive information through a subpoena. Regulation AT dramatically lowers the bar for the federal government to obtain this information”.

    Is there an alternative way to meet the objective of market stability without yielding people's sacrosanct right to their property ?

    If net-capital can be calculated in real-time through an automated system, then it is possible that an electronic transmission of a deficiency in liquidity can be sent to a designated contract markets (DCM) or an exchange to block trading in real-time for the deficient market participant.

    If the net capital charges known as haircuts were calculated apart from the participant under the supervision of the regulator, this would alleviate cost or preparation for the participant and minimize the stressed budgets at the CFTC and SEC to examining one system.

    As the government is to protect the property of the people, then government has a responsibility to circumvent algorithmic threats to investor net-capital at the moment net-capital (technically people's property) is compromised.

    A kill switch which shuts down a profitable algorithm intrudes on rights to private property and is contrary to the role of government The “additional cost and burdens” associated the proposal deplete investor capital and is contrary to the role of the agency to protect the investor.

    Has it been documented how those investors will be made whole if an algorithm is turned off due to a spike in profitable trading?