Exchanges Offer Proposals to SEC to Strengthen Infrastructure

Date : 11/12/2013 @ 11:30AM
Source : Dow Jones News
Stock : Nasdaq, Inc. (MM) (NDAQ)
Quote : 70.45  0.54 (0.77%) @ 4:38PM

Exchanges Offer Proposals to SEC to Strengthen Infrastructure

Goldman Sachs (NYSE:GS)
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Several of the major U.S. exchange operators on Tuesday said they have agreed to a series of proposals aimed at improving the infrastructure of markets.

The proposals come after a run of recent breakdowns--two at Nasdaq and one at NYSE. Following the glitches, the Securities and Exchange Commission in September set a 60-day deadline for exchanges to strengthen their technology, and exchange executives have since brainstormed ways to build better backup systems.

The agreement announced Tuesday includes "proposals designed to improve operational resiliency, strengthen interoperability standards and disaster recovery capabilities, enhance governance, accountability and transparency, and establish a clear testing framework for the industry," according to a press release from the exchanges and the SEC.

The agreement also addresses improvements to critical infrastructure, trading halts and breaking of trades. The groups added they are still working on a proposed common "kill switch" to prevent market disruption.

The exchange operators came together at the request of SEC Chairwoman Mary Jo White, who said in September that exchanges and regulators need to focus on rebuilding confidence that markets will be able to operate in all kinds of trading environments.

A potential cooperation between NYSE and Nasdaq grew out of those discussions, the people said.

As competition among exchanges and other trading platforms has ramped up in recent years, critics say exchanges have fallen short in their regulatory responsibilities as they seek to lure trading to their systems.

Last week, options exchange heads said at an industry conference in Chicago that meetings had been productive, and that they were close to uniform policy on how to handle erroneous trades. Differing rules at the 12 U.S. options exchanges allowed Goldman Sachs Group Inc. (GS) to emerge largely unscathed after it mistakenly issued waves of orders to trade stock-options contracts for prices well off the prevailing market rate.

Write to Geoffrey Rogow at geoffrey.rogow@wsj.com and Kaitlyn Kiernan at kaitlyn.kiernan@wsj.com

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