Over the past few years, financial regulators have been urging firms that execute automated trading (AT) strategies to implement policies and controls reasonably designed to prevent market disruption by that trading. The recast Markets in Financial Instruments Directive (MiFID II), which went into effect earlier this year, ushered in new restrictions for algorithmic traders. FINRA and several industry organizations have also begun to fill in the gaps on the U.S. equities side by issuing detailed guidance covering everything from pre-trade controls to system documentation procedures. Last, but not least, in November 2015, the CFTC proposed a new rule entitled Regulation Automated Trading (Regulation AT), which calls for the adoption of risk controls, transparency measures and other safeguards to strengthen the regulatory regime surrounding AT. In this two-part guest series, Douglas A. Rappaport and Elizabeth C. Rosen of Akin Gump outline five high-level first steps for legal and compliance professionals to design and implement a control framework tailored to a hedge fund manager’s AT program that will stand up to regulatory scrutiny. The first article covers steps one and two, including a discussion on how to conduct a risk assessment of and document the AT system. The second article explores the remaining steps, addressing protocols for monitoring and reviewing trading activity, source code and disclosures. While Regulation AT has not yet been adopted, this article remains required reading for any fund manager pursuing AT in light of the actions taken by other regulatory bodies, as well as the general expectation that those managers have policies and procedures tailored to the risks associated with that form of trading. For more on how MiFID II regulates AT, see “FCA Outlines U.K. and MiFID II Requirements for the Development, Testing and Operation of Algorithmic Trading Systems” (Mar. 1, 2018); and “ACA Panel Reviews Effects of Impending MiFID II on U.S. Advisers” (Dec. 7, 2017).