Following a September meeting called by SEC chair Mary Jo White to address technology issues disrupting capital markets, self-regulatory organizations (SROs) for the equities and options markets have developed proposals to strengthen trading infrastructure.
The SROs consist of BATS, BOX, Chicago Board Options Exchange (CBOE), Chicago Stock Exchange (CHX), Direct Edge, FINRA, International Securities Exchange
(ISE), MIAX Options, National Stock Exchange (NSE), Nasdaq and NYSE Euronext.
While specific details of the proposal will not be laid out until future filings, the SROs are addressing the five points that emerged from the meeting with the SEC.
One of the areas addresses the securities information processor (SIP), which disseminates prices to the industry and caused the Nasdaq’s trading interruption in September due to an outage. The SROs and SIP committee have developed proposals to strengthen disaster recovery and improve operational resiliency in part by sharing best practices, reviewing existing policies, and updating technology change procedures.
Another area addressed by the SROs includes establishing ways to identify contingencies in critical infrastructure items such as regulator messaging, IPOs and DTCC/OCC outages. The SROs also agreed to the three principals of transparency, limited discretion, and the coordination of halts/resumptions by the primary markets as it establishes further proposals.
Additionally, the SROs are examining rules for trade breaks and in the equity markets, they are working toward a consensus on developing a kill switch to stop trading when technology problems occur.
“I appreciate the time and effort that the SROs continue to invest in addressing the critical market infrastructure issues that were discussed in our September meeting,” says SEC Chair White. “[Tuesday’s] reports are very constructive, but work remains to be done. I look forward to reviewing the specific details of the SRO proposals, which I understand will be fully reflected in forthcoming rule filings and NMS plan amendments that the Commission will consider. The staff will continue to work with the SROs to expeditiously implement these enhancements to the operational integrity of our securities markets.”
Exchanges Address SEC Concerns on Technology Glitches
Following a September meeting called by SEC chair Mary Jo White to address technology issues disrupting capital markets, self-regulatory organizations (SROs) for the equities and options markets have developed proposals to strengthen trading infrastructure.