Protect HFT cheetahs from regulatory poachers In June, Bart Chilton, a commissioner at the Commodity Futures Trading Commission, compared high frequency trading to cheetahs. His metaphor is compelling: cheetahs are the fastest four-legged animal. The "market cheetahs," he explained, are trying to hunt down micro dollars in milliseconds. "We need to do a better job of keeping up with the cheetahs," he proclaimed. I agree, but the "cheetahs" also need protection. Mr Chilton recognises that American futures are a precious national asset. He knows futures began as an efficient system for hedging agricultural products, helping provide our nation with high-quality food at cheap prices. They revolutionised the industry by introducing financial instruments to risk-management techniques. IN Opinion To its credit, the CFTC encouraged some of these momentous innovations. On its watch, the concept of "cash settlement" was introduced and there was a transformation from open outcry to electronic trade. Exchanges were restructured from private organisations to public entities. So, the US futures market grew to an $82tn industry. While I cannot speak for securities markets, HFT in futures represents but one more evolutionary step in the life of this American asset. It involves the execution of complicated, algorithmic-based trades by powerful computers. Their principal objective is to take advantage of minute discrepancies in prices. It is part of the technological revolution that has permeated every nook and cranny of our lives. We are online 24 hours-a-day. We text, we email, we tweet, and we cannot go back to the way it was. HFT has made it harder for the traditional floor trader and affected the ability of the point-and-click crowd to make money. I am one of its victims. When I began as a trader in the pork belly pit, I was as high a high frequency trader as possible. My computer was in my head and it responded as fast as it could. There were others in the pit who were slower. But there were also traders who were much faster. It never occurred to me to pass a law to cut them down to my speed. Nor did I ever consider preventing traders from mechanising their trading model. I never thought that this was somehow unfair, and I readily understood a trader's request to gain a trading booth closer to the pit. James Angel, associate professor of finance at Georgetown University, recently said it made him shudder when he heard regulators asking: "Is it fair that people spend extra money to sit their computer right next to the stock exchange computer?" He said it showed an almost shocking ignorance of financial history. Dozens of studies on HFT share the verdict of the Bank for International Settlements (BIS) in its study, "High-frequency trading in the foreign exchange market," published in September. BIS found that by arbitraging away price discrepancies, HFT narrows the spread between bid and offer, improves market liquidity and lowers trading costs to small investors. Similarly, studies devoted to the "flash crash" of May 6 2010 have reached virtually the same conclusion: HFT was not to blame. This is not to suggest the CFTC neglect its duty to keep up with the markets. I commend CFTC commissioner Scott O'Malia for his leadership in re-establishing the technology advisory committee. This has provided some excellent recommendations to strengthen electronic trade across both securities and futures markets, such as the adoption of credit controls and carefully calibrated market-wide circuit breakers. Artificial intelligence is scary. But it won't go away. It is directed at deciphering intelligence and then installing it into a computer program. It can beat Garry Kasparov at chess; it can win at Jeopardy; it can translate languages; it can even kill terrorists. And in futures markets, it takes the form of HFT. Our nation's futures markets are an outstanding example of "American Exceptionalism." They are a crucible for innovation and job creation. They represent an American natural resource. It is the duty of the CFTC not only to keep up with the market cheetahs, but as Teddy Roosevelt admonished in a different context, they must also treat our natural resources "as assets which it must turn over to the next generation increased and not impaired in value." The writer is chairman emeritus of the Chicago Mercantile Exchange