US Securities Exchange exploring steps to stem slide in stocks

Securities & Exchange Commission (SEC) officials are considering whether trading restrictions should be imposed across markets for companies that have fallen a certain percentage within a specific time-frame, one source said.

Circuit breakers

Another source said more circuit breakers at a stock level are among many items being discussed and expected to evolve next week, adding “logistics are tough.”
SEC could not immediately be reached for comment.

SEC and the Commodity Futures Trading Commission (CFTC) are still trying to determine the causes for the massive stock market meltdown fueled by computerised trades that caused a nearly 1,000-point plunge in the Dow Jones industrial average.

Official inquiry

Although the regulators have been working around the clock at initial data since Thursday to find the causes, they have yet to notify exchanges of an “official inquiry” into the sell-off, a third source familiar with the review told Reuters. That step would trigger the release of more information to regulators.

When that data comes, the investigation will likely focus on who quoted the “bids” and “offers” throughout the market dive, the bid-ask spreads, trading volumes, and a full list of the canceled trades, the source said.

The third source added regulators conducting the probe “are being diligent” but said they were calm about it despite ongoing jitters on Wall Street.

Trading mistake

The source said regulators had moved away from a theory that the stock plunge was called by a trading mistake, or a so-called “fat finger” episode in keyboard data entry.

Regulators are looking at links between futures and cash markets for stocks. Trading speeds and volumes have ramped up in the last few years as regulators encouraged the proliferation of new trading venues to challenge the incumbent exchanges’ near monopoly.

But in the past year, the SEC had raised some red flags about the fragmented marketplace and so-called high-frequency trading, although it has made few changes.