SEC officials on Thursday told exchanges to work with other market players to come up with “comprehensive action plans” to ensure that the data feeds are resilient, and to ensure the soundness of other “critical infrastructure systems,” according to an SEC statement.
Thursday’s SEC meeting, attended by top executives from exchange operators Nasdaq, NYSE Euronext, BATS Global Markets Inc., Direct Edge Holdings LLC, and others, was marked by one snafu. Nasdaq Chief Executive Robert Greifeld was 40 minutes late due to transportation problems, according to people who attended.
And lest you thought that (slowly outgoing) CFTC Chief Gary Gensler was going to let Mary Jo have all the fun, think again.
Those concerns were echoed at another meeting Thursday held by the Commodity Futures Trading Commission’s Technology Advisory Committee, an industry group that has been looking into automated trading systems.
“As sure as computers and programs have had technical glitches in the past, I believe there will be glitches in the future,” CFTC Chairman Gary Gensler said. “We have to look to risk controls and system safeguards to protect markets when such glitches inevitably occur again.”
So, as financial markets scholar Vladimir Lenin once asked, “what is to be done?”
Exchange officials also were asked to come up with a uniform plan to reopen markets following a broad shutdown in trading, said people who attended the meeting. The Nasdaq shutdown spread confusion among trading firms and other exchanges because there wasn’t a plan to respond to such a widespread halt.
Regulators asked exchange officials to speed up proposals to implement “kill switches” that give exchanges or trading firms the ability quickly shut down trading if a tech problem strikes. Market overseers last year asked the industry to start working on kill switches after a trading problem by Knight Capital Group left that firm with a loss of nearly half a billion dollars….
“The whole idea is the exchanges would work together, come up with proposed solutions,” said William Brodsky, executive chairman of CBOE Holdings Inc., parent of the Chicago Board Options Exchange, who attended the meeting. In April, a software glitch knocked out trading at the exchange for more than three hours.
Exchanges plan to collaborate with the Financial Industry Regulatory Authority, clearinghouses and brokers to formulate the proposals. A follow-up conference call is expected in the next week to discuss next steps, said Anthony McCormick, CEO of BOX Options Exchange.