Bright and slow

5 June 2014 By Daniel Indiviglio

The U.S. watchdog’s plan to scrutinize high-frequency dealing lacks detail, but more trader and dark-pool oversight seems a no-brainer. The point is that the markets are set for a major review as investor faith erodes. Making them simpler and more stable would be a worthy goal.

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U.S. Securities and Exchange Commission Chair Mary Jo White on June 5 announced plans to consider new rules on high-frequency trading and dark pools. During a speech before financial professionals in New York, she stressed that the securities markets aren’t rigged but need to be more transparent.

White said she has directed SEC staff to develop a rule limiting short-term trading that can disrupt markets when liquidity is low. She also proposed requiring proprietary traders to register with the regulator and comply with broker-dealer rules, off-exchange dealers to become members of the Financial Industry Regulatory Authority and firms engaged in algorithmic trading to tighten risk management. She said she will recommend that data feeds carry clearer and more complete time stamps and that exchanges give more detail on what those feeds are used for.

Broker conflicts, market fragmentation and whether dark trading pools obscure securities prices will also get a close look, she said.

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