Sec. 2. Requirements applicable to high frequency traders of commodity futures and options
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The Commodity Exchange Act ( 7 U.S.C. 1 et seq. ) is amended by inserting after section 4t the following: It shall be unlawful for any person to engage in an activity that the Commission has defined in regulations as high frequency trading, unless the person has registered with the Commission (in such form, in such manner, and providing such information as the Commission shall prescribe) as a high frequency trader, and the registration has not expired or been suspended or revoked.
A registered high frequency trader shall— test all computer programs and algorithms used by the trader in any high frequency trading activity and determine whether the programs and algorithms are functioning properly, in such manner and with such frequency as the Commission shall prescribe in regulations; establish and document high frequency trading system safeguards reasonably designed to ensure the proper function of all programs and algorithms used by the high frequency trader including conditions and parameters relating to the automatic termination, pausing, or cancellation of the trader’s messaging or trading activity, maximum message and trade execution rates and order sizes, intra-day risk position limits, and market and trade monitoring systems that are appropriate for ensuring compliance with the system safeguards, including systems designed to monitor market volatility and the trader’s risk position on an intra-day basis; shall not simultaneously purchase and sell through the same or different accounts the same commodity contract, agreement, or transaction, unless the simultaneous purchases and sales are of a de minimis quantity and are reported to the Commission periodically, in a form and manner to be determined by the Commission; submit to the Commission semiannual reports on the high frequency trading activities of the trader during the period covered by the report, in such form, in such manner, and containing such information as the Commission may require, signed by the chief executive officer (or equivalent officer) of the trader; and conform with such business conduct standards as may be prescribed by the Commission by rule or regulation that relate to— fraud, manipulation, and other abusive or disruptive practices, and other practices that may affect market integrity involving high frequency traders (including high frequency trades that are offered but not entered into); and such other matters as the Commission may determine are appropriate in the public interest or otherwise in furtherance of the purposes of this Act, including information necessary to develop a classification scheme and public reports relating to high frequency traders and trading activity and sub-categories thereto. .
Within 9 months after the date of the enactment of this Act, the Commodity Futures Trading Commission shall prescribe final regulations defining the activities that shall be considered to be high frequency trading for purposes of section 4u of the Commodities Exchange Act.
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Sec. 2
Requirements applicable to high frequency traders of commodity futures and options
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