SEC Approves First Round of HFT Restrictions

November 21st, 2014

Yesterday, November 19, 2014, the Securities and Exchange Commission (SEC) adopted new rules to govern trading technology. The Regulation Systems Compliance and Integrity (Regulation SCI), takes the first steps in over two decades to place boundaries on the modern technological systems employed by Wall Street today.

The rules were developed largely in response to the recent attention on high frequency trading (HFT) and related flash crashes.  Since 2010, the market has experienced various short-term blackouts, glitches and technology failure, to the detriment of investor confidence and consumer information.  The SEC states, “Given the heavy reliance on technology and automated systems in the securities markets today, the impact of technology failures can be significant.  Recent technology issues in the markets have illustrated the risks of systems issues, including the impact on investors and losses that can occur.”

Covered entities will be required to establish new policies and procedures to monitor and report on technological problems as well as disclose basic information about their trading systems. “The rules provide greater accountability for those responsible for our critical market systems, helping ensure that such systems operate effectively and that any issues are promptly corrected and communicated to market participants and the Commission,” said SEC Chair Mary Jo White.

The rules will become effective sometime in the next three months, 60 days after they are published in the Federal Register.


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