Summary: Pursuant to a congressional request, GAO reviewed information on: (1) automation initiatives at 14 U.S. futures exchanges that recorded accurate trade times; (2) risk assessments of two automated trading systems that were being developed by the Chicago Board of Trade and the Chicago Mercantile Exchange (CME); and (3) steps taken by the Commodity Futures Trading Commission (CFTC) to assess automation initiatives.
GAO held that: (1) the six automation initiatives were intended to provide accurately timed records, although effectively detecting trade practice abuses would depend on how exchanges used such records; (2) the successful implementation of the six systems could benefit other exchanges; and (3) the exchanges need to ensure that internal controls are strengthened before they implement after-hours trading systems. GAO also found that CFTC implemented several actions to strengthen its oversight of automated systems, including: (1) technical assessments of planned systems; (2) evaluations of operating systems; (3) an interagency task force; (4) a formal policy for system assessments; (5) increased automation oversight; and (6) seeking additional technical resources.
