The Securities and Exchange Commission approved new rules Wednesday
to make sure that the systems that Wall Street trades run on are robust
and vigilant enough to stand up to cyberattacks and technological
glitches.
Regulation Systems, Compliance, and Integrity (or
Regulation SCI) will create a framework for overseeing the complex
systems that operate on Wall Street — and, increasingly, clash with each
other, get hacked or fail.
"In
today's markets, a single rogue algorithm can trigger a cascading
series of errant trades, destroying billions of dollars of market value
in the blink of an eye," says SEC Commissioner Luis Aguilar.
The
most dramatic example was the Flash Crash on May 6, 2010, when the Dow
Jones industrial average plunged 1,000 points, or nearly 9%, in minutes —
only to recover nearly as quickly.
The
new rules require periodic stress tests of system capacity, as well as
requirements that companies report and address problems and malfunctions
to the SEC immediately.
Previous
systems rules on Wall Street were largely voluntary, and the original
version was simply conceived as a codification of voluntary review. SEC
staff worked with public comments to streamline the regulations and
reduce the burden on the companies involved. "These companies have an
enlightened self-interest in getting things right," said Commissioner
Daniel Gallagher.
"As I have emphasized time and
again, the critical infrastructure of the American securities markets
must be built on the best, most robust technology feasible," SEC Chair
Mary Jo White said in her opening statement. "Failures must be minimized
and, when they occur, they must be remediated as quickly as possible
and promptly reported to the commission."
"Much more can and needs
to be done," Commissioner Kara Stein noted, objecting that some smaller
trading platforms were exempted from the new rules, as well as to
broker-dealers who operate proprietary platforms.
The commission passed the regulation, 5-0.
USA Today
11/19/2014
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