'Flash Crash' Fallout Continues: More SEC Changes Coming
Nov 8th 2010 8:00PM
Updated Nov 8th 2010 8:05PM
The U.S. Securities and Exchange Commission may further tinker with the algorithms that it uses to stop trading during large price swings in stocks, SEC Chairwoman Mary Schapiro said Monday.
These so-called circuit breakers, which in June were programmed to stop market-wide trading for five minutes if a stock's price falls at least 10% in five minutes, have halted trading roughly a dozen times in the past five months. The circuit breakers were part of a series of changes that resulted from the May 6 "flash crash," which eliminated about $862 billion worth of equity in less than 20 minutes, then largely recovered.
The crash was caused by a large "sell" order of Standard & Poor's 500 E-mini futures contracts that was executed by a computer algorithm, according to a report from the SEC and Commodity Futures Trading Commission last month.
Schapiro said the SEC, which may change additional market rules during the next few months, may adjust the length and size of a price drop required to trigger a shutdown, according to the Journal.