Top

Published in:

2013 | OriginalPaper | Chapter

6. Closing Remarks

Author : Richard Ketchum

Published in: The Quality of Our Financial Markets

Publisher: Springer New York

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

ROBERT SCHWARTZ: It is my great honor to introduce Rick Ketchum. As you all know, Rick is an outstanding highlight for this conference. His many admirers say Rick has a fantastic and extraordinary way of thinking about market structure. I agree. Rick, you really don’t need any introduction with this kind of reputation. Welcome. (Applause)

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Technik"

Online-Abonnement

Mit Springer Professional "Technik" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 390 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Maschinenbau + Werkstoffe

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

previous chapter New Technology: What Does It Bring to the Table?

Ketchum is referring to a study released by the Commodity and Futures Trading Commission and the US Securities and Exchange Commission. Findings Regarding The Market Events of May 6th, 2010, September 30, 2010. See, http://www.sec.gov/news/studies/2010/marketevents-report.pdf.

For a more expansive viewpoint on this topic, read Ketchum’s subsequent keynote at the Annual Conference of the Security Traders Association, Palm Beach. FL., October 13, 2011. http://www.finra.org/Newsroom/Speeches/Ketchum/P124661

Findings Regarding The Market Events of May 6th, 2010, September 30, 2010. See, http://www.sec.gov/news/studies/2010/marketevents-report.pdf

At the time of writing, US stock trading occurred on 10 public exchanges, 30-plus dark pools, and over 200 internalizing broker dealers. Many of the dark pools accommodated internalization by their owners. In excess of three quarters of the order flow executed through dark pools was thought to be internalized. Some 33% of NYSE volume and 25% of NASDAQ volume was reported off-exchange and it was mostly internalized order flow, according to industry calculations.

The US equity markets are governed and regulated today by various regulations including Reg NMS. The “top of the book” refers to how the best electronically delivered price quotes, the so-called top-of-book orders, must be posted across all exchanges under the mandate of Reg NMS.

See, Findings Regarding The Market Events of May 6th, 2010, September 30, 2010. http://www.sec.gov/news/studies/2010/marketevents-report.pdf

See, SEC Questions Trading Crusade as Market Makers Disappear, Nina Mehta, Bloomberg, September 13, 2010 http://www.bloomberg.com/news/2010-09-13/sec-second-guesses-its-stock-trading-crusade-as-u-s-market-makers-vanish.html

See, Securities watchdog probes high-frequency trading firms: report, Reuters, March 23, 2012 http://news.yahoo.com/securities-watchdog-probes-high-frequency-trading-firms-report-063227979.html

See, Concept Release on Equity Market Structure, January 14, 2010, http://www.sec.gov/rules/concept/2010/34-61358.pdf

See, for example, FINRA Regulatory Notice 10–43, http://www.finra.org/Industry/Regulation/Notices/2010/P121634

See FINRA Regulatory Notice 10–30 http://www.finra.org/Industry/Regulation/Notices/2010/P122122

Two years after the Flash Crash, some commentators were critical of the regulatory measures taken to help prevent a similar occurrence again. For one thing, these pauses or circuit breakers to halt trading in stocks were seen as counterproductive in some instance. See, US ‘flash crash’ measures suffer delays. Telis Demos, Financial Times, May 6, 2012. http://www.ft.com/intl/cms/s/0/ee439fe6-96af-11e1-847c-00144feabdc0.html#axzz1vF32UV4n

Also, see, Overview, SIFMA http://www.sifma.org/issues/capital-markets/equity-markets/flash-crash/overview/

Ketchum is referring to price limits on some stocks that would temporarily stop trading if they traded outside pre-defined limits. For a summary of SEC regulatory action in this matter, see, Two Years After Flash Crash, SEC Still Pursuing New Safeguards, Michael Peltz, http://www.institutionalinvestor.com/Article/3023836/Two-Years-After-Flash-Crash-SEC-Still-Pursuing-New-Safeguards.html

“At 2:45:28 p.m., trading on the E-Mini was paused for five seconds when the CME Stop Logic Functionality was triggered in order to prevent a cascade of further price declines. In that short period of time, sell-side pressure in the E-Mini was partly alleviated and buy-side interest increased. When trading resumed at 2:45:33 p.m., prices stabilized and shortly thereafter, the E-Mini began to recover.” Page 16, Findings Regarding The Market Events of May 6th, 2010, September 30, 2010. See, http://www.sec.gov/news/studies/2010/marketevents-report.pdf

As defined by SEC in Findings Regarding The Market Events of May 6th, 2010, Sept. 30, 2010: “Cross-market strategies primarily focus on the contemporaneous trading of securities-related products in the futures and securities markets. The objective of these strategies is to capture temporary price differences between any two related products, but with limited or no exposure to subsequent price moves in those products.”

Ketchum is the former president of NASDAQ and was later the chief regulatory officer of the New York Stock Exchange, before serving as chief executive officer of NYSE Regulation. https://www.finra.org/AboutFINRA/Leadership/p019335

“Notable in the trading activity of May 6 was the redirection of order flow by internalizing and preferencing firms to Exchange markets during the most volatile periods of trading. While these firms provide significant liquidity during normal trading periods, they provided little to none at the peak of volatility.” P.12, Recommendations Regarding Regulatory Responses To The Market Events of May 6, 2010. Summary Report of the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues. See, http://www.sec.gov/spotlight/sec-cftcjointcommittee/021811-report.pdf

This so-called naked access permitted high-frequency traders and other market participants to buy and sell stocks on exchanges via a broker’s computer code without any pre-trade checks or reviews. In November 2010, the Securities and Exchange Commission banned the practice.

Title: Closing Remarks
Author: Richard Ketchum
Publisher: Springer New York
Book: The Quality of Our Financial Markets
Print ISBN: 978-1-4614-5591-2

Electronic ISBN: 978-1-4614-5592-9

Copyright Year: 2013
DOI: https://doi.org/10.1007/978-1-4614-5592-9_6

Springer Professional

Abstract

Please log in to get access to your license.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Technik"

Springer Professional "Wirtschaft"