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SEC Lacks Smarts Needed to Tackle Shadowy Trades

...but doesn't have the technology or know-how, critics say

By Kevin Spak,  Newser Staff

Posted Aug 20, 2009 2:18 PM CDT

(Newser) – The Securities and Exchange Commission is stepping up its efforts to shine light on the market’s more shadowy corners, examining flash quotes, high-frequency trades, and so-called “dark pools.” But the agency just doesn’t have the technology or trading know-how to keep up, experts tell the Wall Street Journal. “You need the quantitative, analytical capacity that the agency has never had,” said one former SEC secretary.

The problem is that the agency doesn’t go out of its way to collect or analyze data, one former chairman says. Its last attempt to set up a market surveillance system in 1980 drew howls of protest and was discontinued once the exchanges promised to regulate themselves. Now the agency says it’s stepping up its training and recruiting, and developing its own screening system. But critics doubt it’ll change the agency’s enforcement-first, analysis-later mentality.

Securities and Exchange Commission Chair Mary Schapiro arrives on Capitol Hill, June 22, 2009, to testify before the Senate Banking Committee hearing on over-the-counter derivatives.
Securities and Exchange Commission Chair Mary Schapiro arrives on Capitol Hill, June 22, 2009, to testify before the Senate Banking Committee hearing on over-the-counter derivatives.   (AP Photo/Susan Walsh)
Traders gather on the floor.
Traders gather on the floor.   (AP Photo/Richard Drew)
In this June 22, 2009 file photo, Securities and Exchange Commission Chair Mary Schapiro testifies on Capitol Hill.
In this June 22, 2009 file photo, Securities and Exchange Commission Chair Mary Schapiro testifies on Capitol Hill.   (AP Photo/Susan Walsh, file)
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COMMENTS
Showing 3 of 5 comments
TiredMemeCat
Aug 20, 2009 11:33 AM CDT
Then I recommend summary executions - that should straighen up the remaining brokers.
pg13
Aug 20, 2009 8:58 AM CDT
You think they can program systems to track 3rd market trades? The SEC got handed Madoff on a platter and couldn't figure out he was a Ponzi. They can't program systems to friggin call an auditor.
Unaffiliated
Aug 20, 2009 8:09 AM CDT
Maybe they need to borrow some of the former investment bankers being recruited by the CIA.

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