Emerging regulatory issues were on the bill for Friday as an advisory panel met in Washington to review a report on how to prevent another flash crash like the one that threw the markets into a panic on May 6.
The joint panel of the Commodity Futures Trading Commission (CFTC) and the Securities Exchange Commission (SEC) joined together in a public meeting to consider new market rules that might protect against computer-based crashes in the future.
On May 6 in the course of just 20 minutes, the Dow Jones industrial average plunged about 700 points then bounced back up again. The CFTC-SEC report found that the giant tumble was triggered by a single, $4.1 billion computer-initiated trade by a Kansas-based Waddell & Reed mutual fund that involved the sale of E-mini futures contracts.
The panel—comprising former regulators, market participants and economists—met Friday morning in a CFTC hearing room to receive a summary and recap from the staffs of the CFTC and SEC on the report issued Sept. 30. The day's agenda included a report from the subcommittee on cross-market linkages, a report from the subcommittee on pre-trade risk management and a discussion about potential recommendations and responses.
Both CFTC Chairman Gary Gensler and SEC Chairman Mary Schapiro (left) were on hand at the Friday meeting to review what the report termed "a liquidity crisis" stemming from the E-mini contracts.
