New circuit-breaker technology to be introduced to markets, SEC states

13 May 2010

Circuit-breaker technology will be strengthened as part of an overhaul of regulations surrounding financial systems in the wake of the US share price fall, the industry regulator has stated.

Mary Schapiro, chairman of the SEC, made the comments as part of a testimony to the subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.

The investigation follows the crash in the Dow Jones Industrial Average, which fell by 9.2 per cent in value on May 6th.

Although the index showed some recovery during the rest of the day, it still finished 3.2 per cent down by the close of the markets.

Ms Schapiro said she met with leaders of the six markets to discuss reasons for the collapse and possible reforms to introduce to ensure the situation does not occur again.

“At the meeting, we agreed on a structural framework, to be refined over the next day, for strengthening circuit breakers and handling erroneous trades.”

“There was an understanding that solutions must be implemented on a market-wide basis and that the standards applicable to circuit breakers and erroneous trades must be clear to all market participants,” she explained.

According to the SEC, no one event has yet been found to explain the market collapse.

By Jim Ottewill

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