Wed, Oct 1, 2014
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   |   

Banner

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. Legal - Court throws out lawsuits related to Fannie Mae, Freddie Mac profits, Insider case by SEC is a step removed from Herbalife itself, SEC grants Citigroup waivers, easing hedge-fund curbs[more]

    Court throws out lawsuits related to Fannie Mae, Freddie Mac profits From WSJ.com: A group of Wall Street investors on Tuesday suffered a blow in their attempts to sue the federal government over their treatment of the shareholders of mortgage finance giants Fannie Mae and Freddie Mac af

  2. CalPERS’ move might alter hedge fund fees for good[more]

    Benedicte Gravrand, Opalesque Geneva: When CalPERS, the California Public Employees’ Retirement System, announced on September 15th that it was unwinding its hedge-fund portfolio, it was seen by many as is a significant blow to the sector’s appeal. The Fund is

  3. Opalesque Exclusive: Institutions eye private credit over traditional fixed income[more]

    Bailey McCann, Opalesque New York: Investing in private insurance, realty tax receivables, or investment-grade short-term accounts receivable may not spring to mind as a means of mitigating risk in a portfolio, but one firm, New York-based BroadRiver Asset Management is out to change all that. Th

  4. Short-term trading quant fund beats S&P since '09[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: A relatively new multi-strategy, market-neutral quantitative hedge fund has managed to outperform the S&P500 and the HFRX Global since 2009. New Jersey-ba

  5. Unconstrained bond funds: Where hedge fund strategies meet mutual funds[more]

    From CNBC.com: For all the talk and buzz around indexes, or passive investing, the next big thing for bond mutual fund investors may be strategies that are the exact opposite. The rapid growth of "unconstrained bond funds" has been thrust into investor spotlight given last Friday's stunning news tha