High Frequency Trading Regulation - White Paper - The Rationale for AT 9000, August 2012

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August 2012

On August 6 2012, three professors from Illinois Institute of Technology, Ben Van Vliet, Andrew Kumeiga and Rick Cooper, along with Jim Northey of FIX Protocol, Ltd., released a paper that outlines a quality management system for high-frequency and automated trading, based on commonly-accepted engineering standards. The paper, originally entitled The Rationale for HFT 9000: An ISO 9000-style Quality Management System for High Frequency Trading, details the reasoning, framework and implementation of a set of proposed industry best practices for HFT. The initiative has since been renamed "AT 9000."

Summary of the Paper

The paper begins with an overview of high-frequency trading, systemic risk, and the ethical considerations involved with HFT. The authors next explain quality management systems such as the ISO 9000 family of standards, and offer the argument that automated trading demands a similar structure. According to the paper, "the full requirements of AT 9000 will be defined based upon the K|V methodology (shown on page 7 of the document), ISO 9000/9001, ISO 90003, ISO 12207, and guidelines developed by the FIA, and regulators, with substantial input from actual AT operations and technical practitioners across the industry including, but not limited to, proprietary trading firms, broker-dealers, independent software vendors (ISVs) and exchanges."

Examples of specific requirements in AT 9000 are that an automated trading firm:

  • has installed and verified safety controls, such as real-time monitoring controls and kill switches;
  • has verified acceptable algorithmic behavior under a variety of market stress conditions; and
  • employs proper software and system version release management.

Though the paper is currently in draft form, it has been embedded below with special permission from the authors of the study.

References

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