SEC Chief Strikes Confident Tone As 'Flash Crash' Anniversary Nears

First Published Wednesday, 4th May 2011 05:15 pm - © 2011 Dow Jones


By Jessica Holzer

Of Dow Jones NEWSWIRES

WASHINGTON -(Dow Jones)- Securities and Exchange Commission Chairman Mary Schapiro, nearly a year since the May 6 "flash crash," praised her agency's swift response to the stock-market meltdown and expressed cautious optimism it has taken the right steps to prevent something similar from happening again.

"Can I guarantee we will never have another flash crash? No," Schapiro told reporters Wednesday. "But I think these are really important steps to take that I think go a very long way to fortifying our market structure."

The market plunge on May 6, 2010 wiped out about $862 billion in stock-market value in less than 20 minutes and caused the S&P 500 Stock Index's fastest decline ever.

Schapiro said her agency moved "very quickly" after the flash crash to impose a system of trading halts in the stocks listed on the S&P 500 and the Russell 2000 stock indexes. She also credited her agency for moving to bar brokers from allowing traders unfiltered access to a broker's trading systems and to ban traders from posting quotes way outside market prices.

"I think we've gotten a lot done. I think we have more to do," Schapiro told reporters after testifying in a Senate hearing on the agency's 2012 budget request.

She said her agency needs to work with the Commodity Futures Trading Commission to update a system of "cross-market" circuit breakers for the futures and equity markets. She also said the SEC would be moving forward soon on two proposals, known as consolidated audit trail and large trader reporting, aimed at helping it diagnose the causes of market meltdowns faster. The SEC and CFTC took more than five months to issue a joint report on the causes of the flash crash.

"My hope is in that the next few months we'll have the breathing room to go ahead and finalize those proposals," she said.

-By Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@dowjones.com

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