Mon, Jun 18, 2018
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. Lyxor recommends stockpicking strategies, L/S equity hedge funds well equipped for turbulent markets[more]

    Matthias Knab, Opalesque: Market developments in May saw some trend reversals across the fixed income and commodity space. On the one hand, the unfolding of the Italian political crisis coincided with a rebound of U.S. Treasuries during the second half of May. On the other hand, the rising likeli

  2. North America - George Soros: 'Everything that could go wrong has gone wrong'[more]

    From Marketwatch.com: George Soros, tell us how you really feel. 'Everything that could go wrong has gone wrong. [Trump] is willing to destroy the world.' The 87-year-old billionaire clearly isn't shy about expressing his generally liberal views and distaste for Trump's "America First" platform,

  3. Paper: The performance of stocks actively pitched by hedge funds[more]

    Using a novel dataset drawn from investment conferences from 2008 to 2013, I show that hedge funds take advantage of the publicity of these conferences to strategically release their book information to drive market demand. Specifically, hedge funds sell pitched stocks after the conferences to ta

  4. North America - US fundraising for special purpose acquisition vehicles hits record this year[more]

    From AFR.com: Special purpose acquisition vehicles (spacs) are hitting the US market at the fastest rate on record, attracting the likes of Goldman Sachs and hedge fund investor Daniel Loeb for the two largest such deals in 2018. Spacs have raised $US4.5bn so far in 2018, the largest amount fo

  5. Investing - Man Group and AQR try to take aim at private equity industry, Hedge funds poised to be winners in AT&T-Time Warner deal[more]

    Man Group and AQR try to take aim at private equity industry From FT.com: The popularity of private equity investments has prompted asset managers such as Man Group and AQR to devise strategies that aim to replicate PE returns but at a much lower cost to investors. Both companies a