CFTC proposes co-location rule

CFTC proposes co-location rule

The US Commodity Futures Trading Commission (CFTC) is calling for a new rule governing co-location in a bid to level the playing field for traders.

The practice of co-location - where high-frequency traders place their servers close to the matching engine of exchanges enabling them to route trades faster - has become increasingly controversial in recent months.

The CFTC says its proposed rule would ensure market participants would "have equal access to co-location and/or proximity hosting services without artificial barriers that act to exclude some market participants from accessing these services".

It would also cover third-party vendors, ensuring they could sell co-location services if qualified. Exchanges would also have to disclose publicly, via their Web sites, the longest, shortest, and average latencies for each connectivity option.

Finally, the CFTC wants co-location fees to be "equitable, uniform, and non-discriminatory" in a bid to address the charge that only the richest participants can take advantage of the services.

The proposed rule is being posted on the government's Federal Register and will be open for public comment for 30 days.

The Securities and Exchange Commission is also investigating co-location, as part of its wide ranging review of markets which is also considering high-frequency trading, flash orders and dark pools.

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