Home / IT / Telecom / Tech/ British watchdog tells computer traders to tighten controls

British watchdog tells computer traders to tighten controls

Comments / {{hitsCtrl.values.hits}} Views / Tuesday, 13 February 2018 00:00

London (Reuters): Some firms using computers to trade at ultra-fast speeds are not applying safeguards required to avert market meltdowns, Britain’s Financial Conduct Authority said yesterday.

Algorithmic or high-frequency trading uses computers to automatically place an order in financial markets, without human intervention, and represents sizeable volume on stock markets.

The FCA reviewed algo trading, which some critics have blamed for sharp price moves, at about a dozen firms and found that some were failing to apply mandatory safeguards properly.

Sterling’s “flash crash” in Asian trading in October 2016 was blamed by some on algo trading, but a central bank report later concluded there was no single perpetrator.

 “Firms should consider and act on its content in the context of good practice for their business,” FCA director of wholesale supervision Megan Butler said.

Some firms were unable to show that their systems are tested and operating properly, a requirement since January under the European Union’s new “MiFID II” securities law.

 “Additionally, firms need to do more work to identify and reduce potential conduct risks created by their algorithmic trading strategies,” the FCA said in a report.

The FCA did not propose new rules but will “proactively” supervise and monitor algo trading, adding that firms need to consider the combined impact multiple strategies may have on “the fair and effective operation of financial markets”.

AIMA, a trade body for hedge funds, said it needed to study the FCA report before commenting. FIA European Principal Traders Association said it could not comment immediately.

In a related move yesterday, the Bank of England published a consultation paper on what it expects from firms it authorises regarding the management of risks from algorithmic trading.

 “It applies to all algorithmic trading activities of a firm, including in respect of unregulated financial instruments such as spot foreign exchange,” the BoE’s Prudential Regulation Authority said in a statement.

All firms should name a senior person who is responsible for algorithmic trading, and branches of foreign banks in Britain will have to show they are managing risks properly.

The PRA guidance will come into effect in June, and the regulator will publish a discussion paper on operational resilience in algorithmic trading later this year.

Share This Article


1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.


Today's Columnists

Craving a world with free migration of Homo sapiens

Monday, 18 June 2018

During the discussion time following the presentation of a paper by former diplomat Tamara Kunanayakam on the invasion of Sri Lanka’s economic policymaking by neoliberal economic thinkers two weeks ago, Colombo University’s economics don Lalithas

Sigmoid Curve and Sri Lanka: Significant signals

Monday, 18 June 2018

Sri Lanka, often named as the ‘Wonder of Asia,’ has many citizens wondering what is going on.

Refuse and recuse in Cloud-Cuckoo-Land

Friday, 15 June 2018

I had a dream. That there were monsters ruling the land in the disguise of being military champions. But then some knights in slightly tarnished armour rode to the nation’s defence and liberated us from our saviours. And all was well again. At leas

Floods, drought and disasters

Thursday, 14 June 2018

The Yahapalana Government has been singularly unfortunate in having to face many natural and manmade disasters during their regime.Almost every year many citizens have to undergo the consequences of floods in certain parts of the country whereas ther

Columnists More