SEC votes in favour of introducing new trade audit rules

28 May 2010

Members of the Security and Exchange Commission (SEC) have voted in favour of introducing a new system of auditing trades in the wake of the Dow Jones Industrial Average index crash.

All five SEC commissioners voted to implement a new market surveillance system, which would provide more detailed information on stocks and trades.

Under the proposals, real-time data on quotes and orders for shares would be fed back to a central regulator to enhance analysis of sudden falls in the market.

The Dow Jones index fell by nearly 1,000 points on May 6th in what has become known as the ‘flash crash’.

Mary Schapiro, SEC chairman, said that the system “would allow us to rapidly reconstruct trading activity and to quickly analyze both suspicious trading behaviour and unusual market events”.

Dr John Bates, chief technology officer at Progress Software, backed the decision by the US regulator.

“We wholeheartedly support the SEC's intention to improve real-time market surveillance and establish a consolidated audit trail system.”

He added: “While it's always been a concern that regulators do not have real-time access and monitoring capabilities for all securities market data, it is very encouraging to see that they are about to address the issue.”

The SEC has estimated the cost of establishing a new system at $4 billion.

By Jim Ottewill

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