Regulators Eye Exchange Technology

by Staff Writer on January 27, 2012

The technology used by U.S. stock exchanges faces tougher scrutiny from regulators following several high-profile breakdowns over the past year that snarled trading, according to people familiar with the matter.

The Securities and Exchange Commission is drawing new standards for trading systems that would give the agency more powers to step in when problems occur. The vulnerability of U.S. stock trading to problems in increasingly interdependent electronic systems was highlighted by the May 2010 “flash crash,” which sharpened the SEC’s focus on technology.

Exchanges run by Nasdaq OMX GroupInc. and Direct Edge Holdings suffered big technology glitches over the past year that forced them to make up millions of dollars in losses to customers. Minor problems, such as a server outage that affected trading data for some stocks on the New York Stock Exchange this week, are more common.

Exchanges’ quest to capture automated-trading business has driven them to invest hundreds of millions of dollars in data centers and other hardware to maximize the speed of trading.

Click link to view full article at The Wall Street Journal

Jacob Bunge, The Wall Street Journal, January 27, 2012