Thu, Feb 11, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

SEC, veteran traders agree on market reform over May 6 ‘flash crash’

Thursday, June 03, 2010
Opalesque Industry Update – Expert market traders and the Securities and Exchange Commission (SEC) may clash on the cause of the mysterious “flash crash,” last month but they agree that a structural reform should be forthcoming. The consensus was outcome of a roundtable event sponsored by the SEC, and held on Wednesday as regulators still try to discover the cause of the 700 point plunge in the markets on the afternoon of May 6.

The roundtable was attended by representatives from Gus Sauter (Chief Investment Officer, Vanguard Group, Dan Mathisson (Managing Director, Credit Suisse Group AG), as well as experts from universities, exchanges, and big market makers and high-frequency traders such as RGM Advisors and Getco LLC.

Richard Rosenblatt, a veteran trader since the 1970s, said the Dow Jones plunge of a month ago, an event that he says could have been avoided, shook market confidence. Rosenblatt blamed high speed trading as the culprit for the extreme market volatility that day, reported Reuters.

But Jeffrey Wecker, president of Lime Brokerage disagreed and said that high-frequency traders have been subject to "misplaced vilification." Echoing this was Stephen Schuler, CEO of Getco LLC, who said that algorithmic trading had little to no effect on the long-term price of publicly traded companies.

Adam Sussman, director of research at consultancy TABB Group said the May 6 crash was not caused by just one event or trade or group, but by a combination of rules and the industry’s response, (Source). Sussman suggested that the so-called flash crash should be used by regulators to dig deeper to identify the problem and resolve it with the introduction of new regulation, focusing especially on high frequency trading.

High-frequency traders use super fast computers and quick algorithms to capitalize on tiny market imbalances. The strategy has gained popularity in recent years and an estimated 60% of all U.S. stock trading volume are done through high frequency trading.

SEC chairman Mary L. Shapiro said regulators are “making progress” in their review of the May 6 market turmoil, but added her agency still has not pinpointed its cause.

Several proposals to control future volatility have been placed under consideration, including a single-stock circuit-breaker mechanism that would stop trading for five minutes in all shares of companies in the Standard & Poor's 500 index should any single stock price change at least 10 percent during a five-minute period. ...Other proposed rule changes are forcing high-frequency traders with commitments to trade and a crackdown on anonymous trading venues known as dark pools.

Last week, Jill Sommers, a commissioner with the Commodity Futures Trading Commission admitted that market regulators might never determine the cause of last month’s market crash as there is still no evidence of trading errors or system malfunctions.
-Komfie Manalo

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Credit Suisse cherry picks hedge fund ideas[more]

    From FT.com: Credit Suisse Asset Management plans to cherry pick profitable concepts from hedge funds with the launch in Europe of a “best ideas” strategy. The investment arm of the Swiss bank said the strategy will separate it from other funds blighted by “overcrowding problems”. It comes at a time

  2. Investing - Hedge funds bet on risks in U.S. blue-chip debt, Hedge funds bets against bank credit risk paying off, Tiger Global still likes Internet names, gets pointers from Jeter[more]

    Hedge funds bet on risks in U.S. blue-chip debt From WSJ.com: Hedge funds are betting the next bond sector to crack will be the $4.5 trillion market for the safest U.S. corporate debt. New York’s Perry Capital has placed a $1 billion wager against investment-grade bonds issued by 10 comp

  3. Short Selling - Hedge fund manager Kyle Bass is shorting real estate—again, Top US hedge fund has €80m short position in Paddy Power Betfair[more]

    Hedge fund manager Kyle Bass is shorting real estate—again From Fortune.com: He also predicted the mortgage crisis in 2008. Hedge fund manager Kyle Bass, who runs Dallas-based Hayman Capital, tanked the stock of a little-known real estate financier Friday by revealing that he is shorting

  4. Investing - Real estate secondaries sole 'bright spot' in 2015, As hedge funds stumble, one firm prepares to buy illiquid stakes[more]

    Real estate secondaries sole 'bright spot' in 2015 From IPE.com: The secondary market for property was the sole “bright spot” over the course of 2015, as hedge fund secondaries saw deals fall by two-thirds, according to a wide-ranging survey of the market. Setter Capital said 2015 saw th

  5. Opalesque Exclusive: Directors want to be considered trusted partners by new manager[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: A hedge fund director provides her perspective on emerging hedge fund managers. She will happily work with those who have set themselves up for future growth, s