SEC to Scrutinize High-Frequency Trading

By Antonio Perez
Antonio Perez
Antonio Perez
May 8, 2011 Updated: October 1, 2015

Mary Shapiro, chairman of the Securities and Exchange Commission, at the inaugural meeting of the Financial Stability Oversight Council on Oct. 1, 2010 in Washington. (Brendan Hoffman/Getty Images)
Mary Shapiro, chairman of the Securities and Exchange Commission, at the inaugural meeting of the Financial Stability Oversight Council on Oct. 1, 2010 in Washington. (Brendan Hoffman/Getty Images)
The U.S. Securities and Exchange Commission is looking into preventing the type of lax oversight that followed after last year’s “flash crash,” but it may lack the tools to do so, SEC Chairman Mary Shapiro said last week.

A year after the “flash crash” roiled the financial markets on May 6, 2010—when the Dow Jones Industrial Average fell by more than 1,000 points in a span of 30 minutes—the SEC is still looking at ways to regulate the markets in a way that would prevent the aforementioned event.

The focus of the SEC will be on high-frequency trading firms, which account for more than 50 percent of the volume on major exchanges.

“High-frequency traders turned what was a very down day for many investors into a very profitable one for themselves by taking liquidity rather than providing it,” Schapiro said in a hearing at the Congressional Appropriations Committee last week.

But Shapiro noted that currently the SEC does not have the means to monitor such events, she told the committee. “To obtain individual trader information, the SEC must make a series of manual requests that can take days or even weeks to fulfill.”

She hopes to create a consolidated audit trail of market data points to track various market participants and identify sudden movements.

If created, the new system would replace the current network of circuit breakers, which halt trading of particular stocks if certain triggers are reached.