In the context of the implementation of the Banking Separation and Regulation Act (1), the AMF launched a public consultation on amendments to Book V of its General Regulation with a view to making markets more resilient.
One of the aims of the Act on the Separation and Regulation of Banking Activities is to regulate high-frequency trading. Specifically, the statute, which anticipated the revision of the Markets in Financial Instruments Directive (2) brings in measures that market undertakings and managers of multilateral trading facilities (MTFs) must take to cope with periods of high market stress.
Accordingly, the AMF intends to amend some of the provisions of Titles I and II of Book V (Market Infrastructures) of its General Regulation.
Under the proposed amendments, operators of regulated markets and MTFs would have to introduce measures in respect of:
System robustness:
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Systems must have sufficient capacity to cope with periods of market stress;
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Tests must be carried out to ensure robustness in the event of high volatility;
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Business continuity mechanisms must be activated in case of unexpected failure.
Security mechanisms:
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Clearly erroneous orders or orders with price limits or volumes exceeding preset thresholds must be rejected;
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Trading in a financial instrument must be suspended if sharp price movements occur;
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Trade cancellations may be possible in exceptional circumstances.
Automated order processing systems:
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Procedures are put in place to prevent market disruption;
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Measures are taken to limit the number of unexecuted orders, primarily through charging.
Responses must be sent by 26 September 2014.
Full press release
© AMF - Autorité des Marchés Financiers
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