Gary DeWaal and Associates LLC

Bridging the Week by Gary DeWaal: April 21 to 25 and 28, 2014 (More Flash Boys and Old Rogue Trading Fallout)

Bridging the Week    Compliance Weeds   
Published Date: April 27, 2014

After more than one year under the umbrella of Gary DeWaal and Associates, “Bridging the Week” begins a new life today as a weekly publication of Katten Muchin Rosenman LLP. This is prompted by my joining Katten as a Special Counsel in the firm's New York office as of today, April 28, 2014, where I look forward to servicing my existing clients as well as new clients. My periodic breaking news updates will also be continued, now to be called “Between Bridges.” For details of my joining Katten, click Here; but feel free to contact me directly at my new phone number, (212) 940-6558 or by email at: Thanks to all my existing clients, readers of my blogs, and friends for their support of Gary DeWaal and Associates these past 16 months!

More relevant to this publication, there were no earth-shattering regulatory developments this past week – just more Flash Boys fallout. However, a few items are worthy of attention.

As a result the following matters are covered in this week’s Bridging the Week:

Video version:

Article version:

Compliance Weeds:  As I indicated last week in response to the release by the Securities and Exchange Commission of Frequently Asked Questions regarding risk controls for market access, low latency trading remains in the glare of the public spotlight even though a few weeks have now passed since the publication of Michael Lewis’ book. Unfortunately, it is unlikely that this attention will abate anytime soon. Again, an appropriate response to all this adverse publicity is for low latency trading firms with direct market access – whether to securities or futures markets – to double check that (1) they have robust policies and procedures that, at a minimum, cover all applicable regulatory requirements; (2) their employees routinely are reminded about these internal rules; (3) the firms and their employees follow internal rules; and (4) they routinely conduct adequate surveillance to ensure their ongoing compliance. In addition, to the extent industry organizations have published best practices, firms should endeavor to ensure their policies and procedures promote these standards (see, e.g., the Futures Industry Association’s “Market Access Risk Management Recommendations” (April, 2010; access by clicking Here), and FIA’s  “Software Development and Change Management Recommendations” (March 2012; access by clicking Here). Katten Muchin Rosenman will be hosting two seminars, one in Chicago and one in NYC, on April 28 and May 6, respectively, specifically addressing “Recent Publicity Concerning Proprietary Trading: Potential Regulatory Responses” (for details, click Here for the Chicago event, and Here for the NYC event).

And more briefly:

For more information, see:

CFTC Extends Recording Deadline for CTA Members of DCMs and SEFs:

City of Providence Litigation:

FINRA Board of Governors Decision Involving Charles Schwab:

FINRA’s Proposed Enhanced Background Check Requirement:

ICE Futures Pre-Execution Communications Notice and FAQ:

ICE Summary Fines Amendment:

IIROC Begins Third Phase of Low Latency Trading Study:

SFC Fines Royal Bank of Scotland Over 2011 Rogue Trading Incident:

The information in this article is for informational purposes only and is derived from sources believed to be reliable as of April 26, 2014.  No representation or warranty is made regarding the accuracy of any statement or information in this article.  Also, the information in this article is not intended as a substitute for legal counsel, and is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. The impact of the law for any particular situation depends on a variety of factors; therefore, readers of this article should not act upon any information in the article without seeking professional legal counsel.  Katten Muchin Rosenman LLP and/or Gary DeWaal may represent one or more entities mentioned in this article. 

Circular 230 Disclosure: Pursuant to regulations governing practice before the Internal Revenue Service, any tax advice contained in this article is not intended or written to be used and cannot be used by a taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer.

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