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Exchanges consider “speed bumps” for trading firms
U.S. regulators and exchanges are looking at sweeping circuit breakers and other speed bumps for the high-speed world of electronic trading in case glitches occur, industry executives said on Wednesday, but also noted they are being overwhelmed by the pace of regulatory reforms.
High-profile electronic snafus like the August 1 glitch at Knight Capital Group (KCG.N) that unleashed errant orders and cost the executer of U.S. equity trades $440 million, are prompting a wide review of financial market structures.
Currently, exchanges have so-called “circuit breakers” that halt single stocks if their prices swing too fast in one direction or another, so market participants can pause to figure out if the moves were intentional.
Kevin Murphy, head of U.S. option electronic execution at Citigroup Global Markets, said exchanges and market makers were now looking at creating “speed bumps” that would stop all orders from one market maker at an exchange if the situation called for it, and also possibly across multiple exchanges.
“The market makers are pushing out hundreds of thousands of quotes at a time and they want to make sure that if something goes wrong – an algo gone wild, or whatever it is … that there are some kind of mechanisms,” Murphy said at the FIA/OIC Equity Options Conference in New York.
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Curated by Phin Upham