CNBC’s Bob Pisani reports this afternoon that the Securities & Exchange Commission is expected to make an announcement as soon as Monday about new kinds of circuit breakers it will require to prevent market collapse. The SEC hasn’t yet figured out what the drop percentage in such a circuit breaker should be, but it sounds like it will be something close to 10%, rather than as deep as a 25% drop.
Interestingly, the Financial Industry Regulatory Authority (FINRA), an outgrowth of the old NASD system, will likely be charged with maintaining a central “audit trail” of trades that the SEC can review if need be on a regular basis. Everyone, in other words, will have their trades watched more than today.
That could put pressure, writes Pisani, on high-frequency traders, and so-called dark pools of trading, as well as the internal trade operations of the Bulge Bracket banks, none of which currently offer much information about how and what they trade.
High-frequency traders also don’t guarantee liquidity, writes Pisani, as seen from Testimony Tuesday before Congress that high-freq shops left the market as things got bad last Thursday.� Pisani doesn’t say whether regulators are considering requring some sort of commitment to keep providing liquidity, which is often brought up as the main defense of high-frequency trading shops.
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