SEC approves rules on stock exchange technology
By
Katie Peralta/Medill News Service
Securities and Exchange Commission Chairman Mary Jo White and the four other commissioners voted to adopt a new regulation on technology.
WASHINGTON (MarketWatch) - Despite concerns of some commissioners that a rule doesn't go far enough, the Securities Exchange Commission on Wednesday voted unanimously in favor of regulations designed to ensure the technology at stock exchanges works.
The Commission voted to adopt rules on Regulation Systems Compliance and Integrity, which requires self-regulatory organizations, securities exchanges, registered clearing agencies and significant alternative trading systems, to establish policies and procedures to help ensure that systems have capacity, integrity and resiliency.
SEC Chairwoman Mary Jo White said the adoption of the rule was put in place because the commission could not exercise oversight with a purely voluntary framework.
'Today's market systems demand robust rules, strong internal controls and vigorous enforcement,' White said.
During the meeting, Commissioners highlighted the need for these regulations in light of numerous technical glitches that have occurred in recent years, including the 2010 flash crash, the 2012 glitch from Knight Capital that led to a $461 million loss and the 2013 shutdown of the Nasdaq tape.
White said while some have called for universal coverage of alternative trading systems, the recommendation focused on larger volume platforms and not smaller equity platforms.
The Financial Industry Regulatory Authority released a positive statement in response to the vote. 'We support the Reg SCI direction, and will need to study the details,' it said.
Commissioner Luis Aguilar, who was on video conference from Atlanta, said he was supportive of adopting the rule after the staff addressed concerns on issues including minimum testing standards and personal accountability for those regulated under the regulation.
Aguilar said he was concerned there was concerned that the regulations would not cover broker dealers, but was optimistic White left open the possibility to consider whether a similar framework could apply for broker dealers and transfer agents.
Fellow Democratic Commissioner Kara Stein also stated concern about leaving out broker dealers and many alternative trading centers that trade equities and fixed income securities.
'I am disappointed in this missed opportunity because so many important trading centers are left out,' Stein said, adding the regulation ignored intraday proprietary trading firms.
Republican Commissioner Michael Piwowar said he was pleased staff guidance will be updated periodically.
'It would be impossible, as a practical matter, for us to adjust our rules at the pace that technology has and will evolve,' he said.
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