In response to the recent trading problem at Nasdaq, arising out of a software glitch, the market regulator called the meeting of the executives of the major exchanges, FINRA, DTCC, and the Options Clearing Corporation.
Following extensive consultation with the participants, the SEC Chair Mary Jo White announced five reforms in response to recent trading problems.
Under the proposed plan, the exchanges will be required to draft action plans to set up testing and disclosure protocols pertaining to systems changes for their securities information processors (SIPs).
Besides identifying and providing assessments of the robustness and resilience of other critical infrastructure systems, a SIP plan and/or rule amendments addressing the issuance, effectiveness, and communication of regulatory halts need to be offered.
The concerned parties will also review their rules relating to the trade break process and procedures to reopen trading following a trading halt, and provide amendments to those rules as necessary.
Deployment of "kill switches" would allow exchanges to shut down trading in the event of technological failures, and review and consider other potential risk mitigation mechanisms.
On 22 August 2013, Nasdaq OMX suspended trading for three hours, after spotting a technical issue, subsequently the prices on big technology stocks like Apple, Google and Facebook as well as the value of the Nasdaq index remained frozen.
In May 2013, the SEC imposed a $10m monetary penalty against Nasdaq, for its faulty handling of Facebook initial public offering (IPO), which caused nearly $500m losses for market participants.
