NYSE: Supports Uniform Risk Control Standards Across Markets

A top executive at NYSE Euronext (NYX) on Tuesday will call for various structural and regulatory changes in response to last week's market plunge, including coordinated circuit-breakers, uniform error trade rules and a consolidated audit trail.

NYSE Chief Operating Officer Larry Leibowitz will offer his suggestions to U.S. lawmakers during a hearing on the precipitous May 6 market drop, which is being held by the House Financial Services Capital Markets Subcommittee. He will testify on a second panel along with officials from Nasdaq (NDAQ) and CME Group (CME) after members of Congress first hear from the chief securities and futures regulators.

"The trading events of May 6 are indicative of broader changes to markets and trading practices for which recent advances in technology have been a catalyst, and which the Securities and Exchange Commission wisely has opened for review," Leibowitz said in prepared remarks.

Tuesday's hearing comes just one day after top U.S. exchange officials met with SEC officials to determine the causes and appropriate actions after the Dow Jones Industrial Average dropped nearly 1,000 points on May 6 before rebounding. After the meeting concluded, the SEC announced that the exchanges had agreed to a framework for initiating temporary trading limits on individual stocks.

Officials at the Commodity Futures Trading Commission are also involved in reviewing the market event due to unusual trading in equity index futures linked to the S&P 500 on the CME. The SEC and CFTC said Tuesday they have formed a joint committee to study emerging regulatory issues including the causes of the May 6 event.

One area that Leibowitz said needs to be looked at Tuesday are amendments to Regulation NMS, an SEC rule which aims to facilitate electronic trading in normal market conditions to make sure trades aren't routed away from markets displaying the best prices.

But on May 6 when certain stocks began to plummet, the NYSE switched from electronic trading to manual trading, and Reg NMS was bypassed.

"The ability of markets to bypass a manual market by default resulted in a situation where the markets effectively chose to ignore and trade around our quotes once our circuit breakers were triggered," Leibowitz said. "The events of May 6 have demonstrated that it is time to reconsider the ability of markets to trade through functioning quotes as a default matter."

Leibowitz sought to defend NYSE's hybrid circuit-breaker model Tuesday which requires a temporary slowdown in trading.

He said the average time for slowed stocks on May 6 was about 40 seconds, and some were even "resolved in less than one second."

"I emphasize these points to dispute the notion that NYSE stepped away from the marketplace during this crisis," he said.

-By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634; sarah.lynch@dowjones.com

(Kristina Peterson contributed to this article)

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