Difference between revisions of "FIA Principal Traders Group"

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Principal Traders Group (PTG) is a lobby group formed by the [[Futures Industry Association]] (FIA) to represent [[principal]] traders (i.e. independent [[proprietary trading]] firms that trade only on their own accounts).<ref>{{cite web|url=http://www.forbes.com/2010/08/17/high-frequency-traders-rebranding-personal-finance-principal-traders.html?partner=financial_newsletter|name=High-Frequency Traders Get A New Name|org=Forbes|date=August 17, 2010}}</ref> These firms came under heightened scrutiny for trading practices such as [[high frequency trading]] that may have contributed to [[Wall Street]]'s May 6, 2010 "[[flash crash]]."
 
Principal Traders Group (PTG) is a lobby group formed by the [[Futures Industry Association]] (FIA) to represent [[principal]] traders (i.e. independent [[proprietary trading]] firms that trade only on their own accounts).<ref>{{cite web|url=http://www.forbes.com/2010/08/17/high-frequency-traders-rebranding-personal-finance-principal-traders.html?partner=financial_newsletter|name=High-Frequency Traders Get A New Name|org=Forbes|date=August 17, 2010}}</ref> These firms came under heightened scrutiny for trading practices such as [[high frequency trading]] that may have contributed to [[Wall Street]]'s May 6, 2010 "[[flash crash]]."
  
The group is chaired by [[Donald Wilson]], the head of Chicago-based [[DRW Trading Group]]. Most of the 32 member firms are based in Chicago.<ref>{{cite web|url=http://www.reuters.com/article/idUSN1613832220100616|name=US lobby group formed on high-frequency trade|org=Reuters|date=June 17, 2010}}</ref> [[James Overdahl]] was appointed as the group's spokesman, he is the former chief economist of [[SEC]] and [[CFTC]]..
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The group is chaired by [[Donald Wilson]], the head of Chicago-based [[DRW Trading Group]]. Most of the 32 member firms are based in Chicago.<ref>{{cite web|url=http://www.reuters.com/article/idUSN1613832220100616|name=US lobby group formed on high-frequency trade|org=Reuters|date=June 17, 2010}}</ref> [[James Overdahl]] was appointed as the group's spokesman, he is the former chief economist of [[SEC]] and [[CFTC]].
  
 
While FIA PTG members do not all trade in the same way, many of them rely on automated trading technology and high-speed connections to exchanges.
 
While FIA PTG members do not all trade in the same way, many of them rely on automated trading technology and high-speed connections to exchanges.

Revision as of 12:23, 23 January 2014

FIA 546 2019 Expo Digital Ads-Final.jpg

Principal Traders Group (PTG)
FIA logo.gif
Founded 2010
Products Lobby group formed by the FIA to represent principal traders that trade only on their own accounts

Principal Traders Group (PTG) is a lobby group formed by the Futures Industry Association (FIA) to represent principal traders (i.e. independent proprietary trading firms that trade only on their own accounts).[1] These firms came under heightened scrutiny for trading practices such as high frequency trading that may have contributed to Wall Street's May 6, 2010 "flash crash."

The group is chaired by Donald Wilson, the head of Chicago-based DRW Trading Group. Most of the 32 member firms are based in Chicago.[2] James Overdahl was appointed as the group's spokesman, he is the former chief economist of SEC and CFTC.

While FIA PTG members do not all trade in the same way, many of them rely on automated trading technology and high-speed connections to exchanges.

Mission

Provide a forum for firms trading their own capital to identify and discuss issues confronting the PTG community; Define common positions on public policy issues and advance the group collective interests through the FIA; Improve public understanding of the constructive role played by the wide variety of individual trading groups in the exchange-traded derivatives markets; Promote cost-effective, transparent access to U.S. and non-U.S. markets.

History

Membership in the FIA Principal Traders Group is limited to firms trading their own capital in exchange-traded markets. Principal traders are active in a variety of asset classes such as futures, equities, foreign exchange, and fixed income, and on a variety of exchanges, both in the U.S. and abroad. Trading firms engage in automated, manual and hybrid methods of trade generation and execution encompassing various strategies. Not all principal traders are high-frequency traders.

In June 2010, with high-frequency trading getting a lot of controversy from the public, Principal Traders Group serves as an organized means to respond to inquiries about high frequency trading and allows the member firms to identify best practices within the financial industry.[3]

The Principal Traders Group would get together to discuss issues, speak with media, and circulate proposals and research. In 2013, the top issues include: fair access to centrally cleared OTC markets;implementation of Dodd-Frank market structure changes;regulation and oversight of electronic trading;tax policies which impact PTGs; and communication/education on current market issues.[4]

Papers and Statements

On May 1, 2013, FIA Principal Traders Group issued the following respond to an article in Wall Street Journal alleging that high-frequency traders are taking advantage of a "loophole" in the CME group's market data systems:

“We were surprised and disappointed at the misleading article published today by the Wall Street Journal. The article has taken an inherent feature of all markets out of context, grossly distorted its significance, and created a false impression that the CME’s markets are fundamentally unfair. In our view, exchanges should be commended for reducing the latency and variability in their trading systems, which leads to better market quality and lower trading costs.

For years, exchanges have invested heavily to compress the amount of time it takes to match incoming trades and transmit trade details to their customers and the public. The CME specifically has succeeded in dramatically slashing this amount of time, vastly improving the quality of its markets for investors and hedgers.

“Yet the Wall Street Journal’s article ignores this progress and instead focuses on a slight gap in time between when a trader receives confirmation of his own trade and when the rest of the market sees that a trade has taken place. The article claims that this is a “hidden” “loophole” that some trading firms are unfairly exploiting. The reality is that there is nothing hidden about these timing differences; they are easily measured by any trader with a computer. Every market has timing nuances and these have been whittled down to almost nothing at the CME. Importantly, all market participants are free to use information from their own trade confirmations if they wish.

“Furthermore, the article ignores much longer reporting delays that are extremely common in other markets, and indeed, are expressly sanctioned by government regulators and welcomed by investors. Take for example the concept of block trades, where a large trade is negotiated away from a central market and then reported to the wider market after a specified delay. How much delay? The CFTC, after considerable public discussion, determined that up to 15 minutes is appropriate. That is 900,000 milliseconds! Yet the Wall Street Journal’s alleged “loophole” concerns one to ten milliseconds.

“In comparison to the time of manual trading, markets have never been more open and transparent than they are now. Gone are the days when a retail investor received 15 minute delayed stock quotes while specialists were privy to real-time trade information. Gone are the decades when only floor locals saw the execution of trades and could react in real-time to this information while the public had to wait minutes or hours for the trades to be reported. Today’s electronic markets are more efficient than they have ever been, and we expect that the OTC markets will eventually catch up as well. For these reasons, we are strong proponents of the progress that exchanges have made in this regard and we support further steps to improve the timeliness and transparency of their markets.”


In August of 2012, FIA Principal Traders Group and FIA European Principal Traders Association issued the following joint statemet in response to the disruptions that occurred in the U.S. equity markets on Aug. 1, 2012:

“Our member firms share the concern expressed by many observers and market participants about the problems affecting Knight Capital and the disruptions these problems caused in the U.S. equity markets. Rapid advances in trading technology have brought very substantial benefits for those who use and rely on markets, but there is no question that they also have introduced new sources of risk.

Over the last several years, FIA PTG and FIA ETPA have devoted considerable time and effort to improving risk controls and establishing best practices to prevent market disruptions and strengthen market resiliency. We have issued several reports with specific recommendations for trading firms, brokers and exchanges, and we have worked with regulators and legislators in the U.S. and the EU to implement meaningful and effective reforms.

Earlier this year, the FIA PTG and FIA EPTA issued a paper that recommended a number of specific tests and controls that trading firms should consider whenever they change their technology systems. Technology is a core component of modern markets, and we strongly believe that managing technological change must be an essential element of risk management for all market participants. The recommendations draw on the extensive experience that our member firms have in the field of electronic trading and are designed to provide a framework that all trading firms can use to mitigate risk across the entire software life cycle.

It is not clear yet what caused the problems at Knight Capital, but once the facts are out, we will review our recommendations and amend if needed. Knight’s difficulties highlight how quickly the market punishes trading mistakes, but also how important it is for market participants to work with regulators to minimize threats to market stability. We stand ready to share our expertise with regulators as they examine what happened at Knight Capital and consider what reforms are necessary to safeguard our markets.”[5]


In November 2010, PTG published a white paper entitled Recommendations for Risk Controls for Trading Firms. The paper highlights its recommended policies and procedures for trading operations and electronic trading systems in such areas as:

  • Access and oversight of staff;
  • Testing and error control systems;
  • Pre- and post-execution risk management protections;
  • Contingency plans for trading interruptions; and
  • Physical and electronic security.[6]

Membership

PTG membership is limited to firms which trade solely their own capital. Members engage in traditional, hybrid, and high-frequency trading, in an assortment of asset classes. Member firms include:

Key People

References

  1. High-Frequency Traders Get A New Name. Forbes.
  2. US lobby group formed on high-frequency trade. Reuters.
  3. High frequency traders get an ally. Futures.
  4. Mission. FIA.
  5. Press Release. Futures Industry.
  6. Recommendations for Risk Controls for Trading Firms. FIA Principal Traders Group.