Walt Lukken, president and CEO of the FIA, spoke with JLN about what is in store for the rest of the year at the trade organization.
The FIA has been coordinating with 10 working groups on what upcoming rules about automated trading (Reg AT) should look like for the futures industry. Lukken said that the FIA believes it would be best to break Reg AT into two more manageable parts. The first portion would focus on getting pre-trade risk controls up to snuff, and the second part would delve into the more contentious parts of Reg AT, such as definitions of automated trading participants, which are currently either under or over-inclusive.
Another big concern for the FIA is the CFTC’s desire to get and store, without a subpoena, firms’ proprietary algorithms, which have enormous intellectual property value for the firms. The FIA’s view is that a subpoena should be required to get that information, which is the lifeblood of the industry.
But Reg AT is only one of the issues on the FIA’s plate. This spring the FIA has been dealing with the BASEL leverage ratio rules. As currently interpreted by the BASEL regulators, the rules don’t allow an offset for customer margin. As a result, the regs tend to overstate the leverage of banks and the amount of capital they must hold, which in turn negatively impacts clearing. The FIA recently filed a comment letter showing data on why that is impractical and would harm clearing in the industry. They expect the BASEL regulators to have a final answer on the leverage ratio by November.
Despite an unexpected one-year reprieve from MiFID implementation, the FIA continues its work on preparing for that set of regulations. Plus, the FIA is parsing through the ramifications of the elephant in the room, Brexit, and how it may impact trading and clearing.