Financial Regulatory Forum

Kill switches may be too difficult to implement despite new call by CFTC member, expert says

By Emmanuel Olaoye, Compliance Complete

WASHINGTON, Oct. 17 (Thomson Reuters Accelus) - CFTC Commissioner Bart Chilton has called for high frequency traders, or “cheetahs” to face so-called kill switches that would shut down a broker dealer’s trading over erroneous orders or technology glitches. But a trading expert said the measure may be too difficult to implement in practice.

The problem with kill switches lies with the timing of the decision to turn off electronic trading, said Bernard Donefer, a professor of Trading Technology and Risk management in financial markets at Baruch College and NYU Stern School of Business.  (more…)

ANALYSIS-New US circuit breakers trip, stumble on problems

By Jonathan Spicer

NEW YORK, July 2 (Reuters) – Abrupt halts in the trading of both Citigroup Inc and Washington Post Co shares over the last few weeks exposed some problems with new rules meant to avoid a repeat of the May “flash crash,” and may give traction to an alternative fix.

The halts came on separate days after erroneous trades were made in the shares, each time tripping new stock-specific circuit breakers that immediately stopped trading for five minutes.


from DealZone:

The afternoon deal: Regulation overdrive

MOTOR-RACING-NASCAR/A joint Senate-House of Representatives conference committee convened at 2:15 p.m. EDT to begin merging competing bills from each chamber into what will be the biggest overhaul of the financial rules since the 1930s. Columnist John Kemp explains the simple conference process and the not so simple reality of merging the House of Representatives and Senate versions of the financial reform bill. The "base text" for the regulatory bill is here.

Not to be overshadowed by the financial regulation bill, the Commodity Futures Trading Commission said it plans to boost scrutiny of high-frequency trading, which now accounts for as much as half of all U.S. futures volume, and was fingered for its role in the May 6 stock market "flash crash." Get the details of the co-location proposal here.

The SEC approved new so-called circuit breakers. The rules will require the exchanges to pause trading in certain stocks across U.S. equities markets if the price moves 10 percent or more in a five-minute period.

Europe exchanges’ pre-trade safety seen at risk

By Jane Baird

LONDON, May 7 (Reuters) – The safety systems of Europe’s stock exchanges are at risk of being eroded by market pressures and experts say regulators need to act to head off a computer-driven tailspin like the one that hit U.S. stocks on Thursday.

Europe’s big exchanges are still less vulnerable than their U.S counterparts to error-induced convulsions similar to the Dow Jones Industrial Average’s nearly 700 point drop in 10 minutes, but a race for speed is pressuring them to weaken their safety controls

“European exchanges are being forced by commercial pressures to slim down their platforms and show faster and faster trade times, which means they are at risk of eventually cutting off their circuit-breakers. Meanwhile, there are no regulatory counter-measures to pre-empt it” said Frederic Ponzo, a managing partner at Greyspark Partners.

US SEC to mull short-sale curbs in coming weeks

WASHINGTON, Feb 5 (Reuters) – U.S. securities regulators will consider short selling curbs in “coming weeks,” Securities and Exchange Commission Chairman Mary Schapiro said on Friday.

The SEC has proposed a number of ways to curb short-selling, or investors making bearish bets on stocks.

Those proposals include market-wide curbs and so-called circuit breakers that would impose a restriction on short-selling if a stock fell by a certain percentage.