Regulators ask markets to improve technology

The Securities and Exchange Commission is asking the nation’s stock exchanges to introduce “kill switches” and other technological changes after the latest in a long line of computer problems scrambled stock trading.

SEC Chairwoman Mary Jo White asked for the changes at a meeting Thursday with the top executives of the nation’s exchanges. The exchanges will be expected to propose specific technology upgrades and new rules in the next 60 days, according to people at the meeting.

White called for the gathering after software problems took down trading in all stocks listed on the Nasdaq Stock Market for more than three hours Aug. 22.


That event came just two days after Goldman Sachs sent out a burst of errant orders for stock options.

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White said in a statement that she “stressed the need for all market participants to work collaboratively — together and with the commission — to strengthen critical market infrastructure and improve its resilience when technology falls short.”

The recent problems were only the latest programming blunders to raise questions about the stability and reliability of the nation’s increasingly computer-driven stock markets.

In the past, regulators also called for improvements in trading software and hardware, but those conversations and new rules have not prevented new problems. Some technology experts questioned whether the changes proposed Thursday would be any different.

“My impression is that it’s the same old same old,” said Jeffrey Wallis, a managing partner at trading technology provider SunGard Consulting Services.


The industry discussed using kill switches after a programming mishap led to losses of nearly $500 million at Knight Capital in August 2012. The switches would allow an exchange to cut off one of its customers if the amount of trading from the firm exceeded a preset threshold. White asked Thursday for the exchanges to make the switches uniformly available and to propose rules that would force trading firms to use them, people at the meeting said.

But kill switches would not address the issues that caused the Nasdaq disruption in August. The exchange stopped trading in response to a problem in the data system that provides the prices of recent trades.

The New York Stock Exchange and Nasdaq, which run the data feeds for stocks listed on their exchanges, were asked Thursday to come back to the SEC with steps they would take to improve their backup systems for the data feeds.