The City’s financial regulator has opened a consultation on new safeguards for algorithmic trading, proposing mandatory circuit-breakers and deeper audit trails for high-frequency firms.
The proposal
Under the draft rules, firms running algorithmic strategies would need to:
- Implement kill switches that halt trading automatically when risk limits are breached
- Retain full audit trails of every order decision for at least five years
- Report material changes to their algorithms before deployment
The context
The consultation follows a series of “flash events” in bond markets last year, where rapid automated selling amplified price moves. The regulator has stressed that the proposals are not aimed at banning algorithmic trading — which now accounts for the majority of volume in some markets — but at making its failure modes less explosive.
What happens next
The consultation closes in twelve weeks. Responses will feed into final rules, which the regulator hopes to publish early next year.
Sources
- Regulator consultation paper
- Market conduct review (last year)