Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues - White Paper - Recommendations Regarding Regulatory Response to the Market Events of May 6, 2010 - February 18, 2011

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Released on February 18, 2011, this report highlights several issues, and makes recommendations for each:

  • Volatility recommendations:
    • Single stock pauses, or "circuit breakers;"
    • Streamlined procedures for the breaking of trades during times of "aberrant price movements;"
    • Implement minimum quoting requirements by market makers;
    • Implement and coordinate limit up/limit down policies; and
    • Consider a "second tier" pre-trade risk safeguards during instances of insufficient liquidity.
  • Restrictions on co-location and direct access recommendations:
    • Direct access through registered broker-dealers, who must have screens in place to reduce occurrence of erroneous orders;
    • CFTC rulemaking should address "disruptive trading activities" with respect to large orders.
  • Liquidity enhancement recommendations:
    • Liquidity pricing and rebates -- could contain incentives for providing "peak load" liquidity
    • Market maker obligations -- quotations should be "reasonably related to the market."
    • Fairly allocate the cost imposed by high levels of order cancellations, perhaps by assessing a fee.
    • Preferencing, internalization, and routing protocols;
    • Information provision to address reporting requirements for measures of liquidity and order imbalances; and
  • Regulators' access to information recommendation:
    • SEC and CFTC should implement a consolidated audit trail for the US equity markets and augment existing data collection regarding orders and executions.[1]


  1. Recommendations Regarding Regulatory Responses to the Market Events of May 6, 2010 (the Report). SEC. Retrieved on August 3, 2011.

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