April 2016: ‘A Changeable Marketplace’

As you may notice from the photo accompanying this column, the captain of the Waters ship, Victor Anderson, is on vacation this month. As a result, you get me, the US editor. A Wally Pipp–Lou Gehrig scenario this is not. I’ll get to Victor’s feature in a moment, but first I thought I would take this space to highlight my feature. In the middle of March, I flew down to Boca Raton, Fla., for the Futures Industry Association’s (FIA’s) annual sun-soaked conference. 

One topic that was on many people’s lips—and which was the focal point of an entire panel discussion—was the recently proposed Regulation Automated Trading, or Reg AT. The rule aims to provide greater oversight in order to lessen the impact of glitches, rogue algos and erroneous orders sent from automated trading systems. The wide-ranging rule affects asset managers, banks, brokers, exchanges, and vendors. 

So after I returned from the conference, I spent an entire weekend reading the regulation, and going through the almost 60 comment letters provided to the Commodity Futures Trading Commission (CFTC). These letters are basically the “compliment sandwich” of legal documents. “Thank you for the opportunity to give our thoughts and we agree in general with your efforts. Now here’s where you went royally off the rails with your rules. But, again, we like the spirit of the law … now don’t screw this up.” Being a regulator is, indeed, a thankless job.

Also in this issue, Victor looks at the growing prevalence of Agile software development. After reading part one of what will be a two-part feature, I couldn’t help but think that Agile is the way forward for firms that want to remain innovative, while still ticking the regulatory box. As Victor noted, “a key advantage that Agile has over the Waterfall methodology is that it supports flexibility, allowing developers to ‘pivot’ when necessary to ensure that future releases stay relevant to users’ needs, especially in a changeable marketplace.”

That last part is key—a changeable marketplace. The regulatory environment is likely to continue. In the US, especially if the Democrats hold onto the White House—which, at least to me, appears likely—Dodd–Frank and other regulatory regimes will continue to march forward. The ability to be “agile” will be key, for Reg AT or any other looming rule.