The Cost to the Markets
If there was a new prescriptive regulation from the CFTC that said every line of code written for any trading software must be documented as to its purpose and intent, there would be a hew and cry from the industry about the cost versus benefit of such a regulation.
If there was a new prescriptive regulation from the CFTC that said every person who touches a line of code for any trading software must have a liability insurance policy, there would be a hew and cry from the industry about the cost versus the benefit of such a regulation.
However, these are the new implicit regulations being written by enforcement precedent right now because of the CFTC’s persistence in bringing a “thin” civil litigation case against Jitesh Thakkar. Already industry code writers are documenting every line of code. And already, firms are considering whether to have liability insurance for their trading system coders.
Already, this new implicit regulation has raised costs for participants in the markets. There is a new implicit regulation which is raising the cost of innovation. It is raising the cost of participation. It is creating a barrier to entry for small financial technology firms producing software for trading systems. And ultimately, this will be reflected in poorer quality of our markets.
I have made the case why continuing to prosecute Jitesh Thakkar is bad for the CFTC from a cost-benefit analysis, but here I maintain that there is a larger cost to the industry from this enforcement created regulatory precedent.
If there was a proposal in front of the CFTC for this prescriptive regulation, it would not have a chance of being enacted. The industry would fight this tooth and nail.
Instead, this battle is being fought against a strong-willed and proud software entrepreneur who is standing his ground and not agreeing to a plea bargain that would quickly resolve his legal problems and limit his costs.
Jitesh Thakkar is not standing alone, though. More than 1600 people have signed the petition I created on Change.org, including some of the leading brokerage and technology executives from our industry. They are standing with Jitesh, not just because of the injustice of the case being brought against him, but also because of the cost of the regulatory precedent this enforcement created for the industry at large.
From a cost-benefit analysis, the CFTC should drop this case for its own good and the good of the industry.
To sign the petition for Justice for Jitesh, click HERE.