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SEC Proposes Rules to Keep Markets Functioning

Joe Mont | March 19, 2013

Battered by Hurricane Sandy, equity exchanges based in New York were forced to suspend trading for two days in October. Now regulators are requiring exchanges and providers of other services crtical to keeping markets functioning to take steps to prevent failures from human error, software glitches, or extreme weather and natural disasters.

Earlier this month, the Securities and Exchange Commission proposed Regulation SCI, which demands greater stability and resilience in exchange markets when problems arise. The proposed rule, (the acronym stands for “systems, compliance, and integrity”) requires exchanges and clearing houses to have policies and procedures in place to maintain and secure their technology, and it replaces a voluntary program for exchanges and self-regulatory organizations that dates back to 1989.

In addition to natural disasters like Superstorm Sandy, “flash crashes,” more common as automated trading gets faster and faster, have prompted the plans...

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