Industry Analyst to Senate: 'Beware Over-Regulation'
In his testimony before the US Senate today, Advanced Trading and Wall Street & Technology columnist Larry Tabb recommends changes to strengthen the markets without killing future profits.
Editor's Note: On Thursday, September 20, 2012 Larry Tabb of TABB Group testified before the the US Senate Subcommittee Hearing on Computerized Trading. The following is a portion of his remarks and further installments will be posted shortly.
What changes need to be made to help fortify our markets, especially during times of market stress? In particular, is it possible to minimize the systemic effects of a flawed algorithm or a computer strategy gone awry?
The best insulation from a rogue algorithm or trading model run amok are:
1. Circuit breakers (limit up/limit down). These rules need to be implemented as robustly as possible, covering as much of the trading day as possible, as soon as possible. Trading halts will stop a cascading market as long as they are operative. They also need to be harmonized across markets and to some extent across asset classes, especially between index futures and options and their underlying stocks. ... Read full story on Advanced Trading
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