The US Commodity Futures Trading Commission (CFTC) has proposed new rules that would require exchanges and clearing houses to establish disaster recovery procedures in the event of a market-wide disruption.
According to this article, there was "... analysis that indicated that "quote-stuffing" algorithms designed to prevent other HFTs from executing strategies were in play ..." which is a nice description for a denial-of-service attack. For such activity, ordinary
hackers can end up in jail if they get caught ...
The article ends with a statement of a CFTC Commissioner: "If there are algo price pirates out there trying to take advantage of these systems, it's ... a new enforcement regime for us to look at."
Anybody surprised that this could happen ? Is there any other place on this planet where there is more money at stake ? Do we really believe that all market participants, even when getting under severe stress, would always act incredibly honest ?
Better control - also on the technical level - is needed, even if this slows down trading execution times. The benefit for society coming from low latency trading is yet to be found anyway - rather, it might make sense to even introduce some delays, giving
human traders the chance to correct typing errors that can send markets into a frenzy these days.
© Finextra Research 2014