Wednesday, May 8, 2013

Next: A Big Red Panic Button for Stock Exchanges

John Carney writes: The idea of having a kill switch for major national exchanges sounds smart.
There should be ways to shut down trading by firms that seem to be suffering from giant trading errors, such as the flood of erroneous orders sent out by market maker Knight Capital Group last June.

The problem with kill switches is that someone needs to throw them. My own sources say that while the Knight incident was underway, people at Knight hesitated when it came to pulling the plug on the automated trading. They more or less had a kill switch or panic button but refused to press it.
What's needed, really, is a kill switch that doesn't sit at the broker-dealer but at the exchanges themselves. That's what's currently under consideration…..

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