STOCK MARKET WATCH -- Friday, 13 September 2013

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3. U.S. exchanges to create kill switches following Nasdaq outage

http://news.yahoo.com/exchanges-report-sec-60-days-nasdaq-trading-halt-173554726--finance.html

U.S. stock exchanges agreed with regulators on Thursday to reforms including a "kill switch" to stop trading during emergencies, after a software glitch with Nasdaq's stock quote processor last month led to a three-hour trading halt. Securities and Exchange Commission Chair Mary Jo White met privately in Washington with top executives of the major exchanges and later announced five reforms in response to recent trading problems. The exchanges will be required to draft action plans to establish testing and disclosure protocols about systems changes for their securities information processors, or SIPs, which disseminate stock quotes and other data. They also are required to provide a plan to address how regulatory halts are communicated, assess their other critical infrastructure systems and review their current rules for busting trades and re-opening trading after a halt.

"Today's meeting was very constructive," White said in a statement after the meeting concluded.

"I stressed the need for all market participants to work collaboratively - together and with the Commission - to strengthen critical market infrastructure and improve its resilience when technology falls short."

The August 22 Nasdaq trading outage escalated the SEC's concerns about the stability of exchanges. The SEC in March proposed reforms to strengthen the robustness of exchanges' technology after a series of glitches over the past year. Last month's outage was caused by a software bug that clogged Nasdaq's processing of stock quotes from the country's 13 various exchanges.

"We didn't focus on any one day's event," Gary Katz, president and chief executive of the International Securities Exchange, told Reuters after the meeting. Katz said none of the recent technology glitches were related and the participants were focused on how best to deal with disruptions in the future. Other exchange executives who spoke briefly with reporters after leaving the SEC's headquarters said the meeting was constructive and that the rival exchanges were ready to work together.

"Mary Jo ran a very good meeting. We all have pretty clear homework assignments," NYSE Euronext Chief Executive Duncan Niederauer told two reporters. "It's all about working together. We are collectively responsible for investor confidence."

The reforms will need to be filed by the exchanges as formal changes to their rules, as required by federal securities laws. The SEC would then review them before they could go into effect. Niederauer and William Brodsky, executive chairman of Chicago Board Options Exchange operator CBOE Holdings Inc, said the exchanges are supposed to come back to the SEC within 60 days. Another attendee in the SEC's meeting, however, said the 60-day time frame is just a benchmark to help speed things along, and the rule changes are not expected to be completed by then.

The August 22 outage at Nasdaq was the latest in a series of high-profile software errors that have shaken investor confidence....

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