Wall Street & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Compliance

05:34 PM
Connect Directly
Facebook
Google+
Twitter
RSS
E-Mail
50%
50%

SEC Aims for Consistency With Expanded Circuit Breaker and Broken Trade Rules

The SEC's expansion of circuit breakers to Russell 1000 stocks is the first line of defense against another May 6th "flash crash," says Aite Group's Sang Lee, but it may not prevent another disaster.

Industry participants expected the Securities and Exchange Commission's decision last Friday to expand the pilot circuit breaker program to stocks in the Russell 1000 index, as a way to prevent another May 6th "Flash Crash, according to one industry analyst.

“I think there is so much momentum right now behind doing something rather than nothing,” commented Sang Lee, managing partner at Aite Group, the financial markets research firm, in an interview with Advanced Trading.

On Friday, the SEC approved expansion of the six-month pilot program of circuit breakers for stocks in the Standard & Poor’s 500 index, implemented in June, to cover all stocks in the Russell 1000. Under the expanded pilot, trading of covered stocks that rise or fall 10 percent or more within a five-minute span is halted for five additional minutes.

According to published reports, the expansion of the circuit breaker was proposed by the stock exchanges in response to the Flash Crash event, when the Dow Jones industrials swung nearly 1,000 points in less than 30 minutes.

Lee said the circuit breakers were “low hanging fruit” because that was one area where the execution venues agreed on that course of action. “Everyone said it would be better to have market-wide circuit breakers rather than venue specific circuit breakers,” said Lee.

“As far as pilot roll-outs go, this is exactly what we expected. It would roll out with a few stocks and then expand to a greater number of stocks that fall under this. I would expect that they will continue with expansion,” said Lee.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

Previous
1 of 3
Next
Register for Wall Street & Technology Newsletters
Video
Stressed Out by Compliance, Reputational Damage & Fines?
Stressed Out by Compliance, Reputational Damage & Fines?
Financial services executives are living in a "regulatory pressure cooker." Here's how executives are preparing for the new compliance requirements.