Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Friday, May 6, 2011

One Year After the Flash Crash

SEC Chairman Mary L. Schapiro, in her Remarks Before the Investment Company Institute's General Membership Meeting today, addressed the events of last May 6 (the "flash crash") and the SEC's responses to those events.  She concluded by observing that:

We need to continue examining the effects of high speed trading on the markets and on buy-side and fundamental investors. The role of these traders, whose prominence in the markets seems only to increase, should be subject to further scrutiny. The possibility of imposing obligations during times of potential turmoil must remain on the table. And we need to pay attention to other potential flaws that could bring about equally disruptive events.

SIFMA released a statement on the One-Year Anniversary of the Flash Crash and stated, in part:

Over the past year, regulators, the exchanges, and market participants have worked together to fix what went wrong that day. In a unified effort, common sense workable solutions to curb volatility in equity markets have been put in place, including the implementation of a single stock circuit breaker, clarity on how to break erroneous trades and the treatment of so-called stub quotes.  

Additionally, market participants will continue to work with regulators and the exchanges to implement the new limit-up, limit-down proposal recently announced by the Securities and Exchange Commission.  We believe this is a positive step forward from the original single stock circuit breaker system.”

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