SEC Now Thinks Mishmash System Sparked Mayhem

Exchange differences exacerbated plunge
By Jane Yager,  Newser Staff
Posted May 10, 2010 3:30 AM CDT
Trader Steven Rickard reacts in the S&P 500 futures pit at the CME Group in Chicago near the close of trading, Thursday, May 6, 2010.   (AP Photo/Kiichiro Sato)
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(Newser) – As markets open today, the cause of last week's trading chaos remains unclear, but investigators believe mismatches in rules between the NYSE and newer electronic exchanges, combined with fast, complex computer trading systems, triggered the panic. The sudden drop of a futures contract on the Chicago Mercantile Exchange appears to have pushed down other stocks, triggering some market "circuit breakers" to slow trades. But because the exchanges didn't slow together transactions couldn't match the precipitous plunge.

Yesterday on Face the Nation Christopher Dodd blamed the SEC for the problem, saying that the trading system needed new "marketwide circuit breakers," while Alabama Republican Richard Shelby said the problem was that “technology has gotten ahead of the regulators.” SEC officials and heads of the four biggest exchanges meet today to discuss applying circuit breakers to all exchanges, the New York Times reports. Currently, the NYSE is the only exchange with circuit breakers on individual stocks.

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