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.
The European Union is reviewing its share trading rules, known as markets in financial instruments directive (MiFID).
The bloc’s securities regulators opened a probe in April into whether MiFID should be changed to include regulation of new technology such as high-frequency trading.