Flash crash probe requires “deeper” investigation, SEC chair claims

7 October 2010

Further work needs to be undertaken to ensure a repeat of the ‘flash crash’ does not occur again, chairman of the Securities and Exchange Commission (SEC) has said.

Mary Schapiro made the comments in an interview with Reuters following the release of a report by regulators on the reasons behind the crash on May 6th.

Financial technology trading algorithms are at the centre of the investigation into events on the Dow Jones Industrial Average, which dropped by more than 600 points within a 20 minute period.

Mary Schapiro, SEC chairman told Reuters: “We really need to do a deeper dive. We are looking at whether these algos ought to have some kind of risk management controls.”

The 104 page report, which was released by the SEC and Commodity Futures Trading Commission on October 1st, revealed that a single trade, valued at $4.1 billion, triggered the drop although the identity of the trader was not revealed.

In a joint statement released alongside the report’s findings, Mary Schapiro, and Gary Gensler, CFTC chairman, said: “We now must consider what other investor-focused measures are needed to ensure that our markets are fair, efficient and resilient, now and for years to come.”

By Jim Ottewill

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