Tue, Sep 1, 2015
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. Investing - Hedge funds suddenly find real money is back in Argentina's debt, Elon Musk buys more SolarCity stock following hedge fund manager short, BlackRock plans to get into rental-home financing[more]

    Hedge funds suddenly find real money is back in Argentina's debt From Bloomberg.com: The real money is back in Argentina. Before the country’s default in July 2014 (its second in 13 years), most long-term investors abandoned its bond market. As they rushed out, Argentina became a favorit

  2. Activist News - Carl Icahn has snapped up a huge stake in Freeport-McMoRan, and the stock is ripping, Meet Europe's best activist investor[more]

    Carl Icahn has snapped up a huge stake in Freeport-McMoRan, and the stock is ripping From Businessinsider.com: Carl Icahn has picked his next target: Freeport-McMoRan. Icahn and a group of other investors have snapped up an 8.46% stake in mining company Freeport-McMoRan, according to a j

  3. North America - Hedge fund manager Ray Dalio’s challenge to the Fed[more]

    From Newyorker.com: For some reason, Janet Yellen, the chair of the Federal Reserve, decided to skip this year’s annual Fed conference in Jackson Hole, where monetary policymakers from the United States and abroad get together with some prominent academics to discuss the big issues of the moment. Th

  4. Opalesque Exclusive: Credit-focused hedge fund Numen Capital expects more volatility in Europe in coming months[more]

    Benedicte Gravrand, Opalesque Geneva: A London-based hedge fund, which has just hired two emerging managers, is cautious on Europe. Vassilis Paschopoulos and former Lehman’s colleague Nikos Kargadouris, launched a London-based credit-focused hedge fund called

  5. Performance - Hedge funds bruised by stocks’ meltdown, Capstone’s volatility hedge fund is having a monster month thanks to market mayhem[more]

    Hedge funds bruised by stocks’ meltdown From WSJ.com: Hedge-fund managers like to promise their investors protection from market swings. In the recent stock swoon, many were caught off guard. Billionaire managers such as Leon Cooperman, Raymond Dalio and Daniel Loeb are deeply in the red

 

banner