STOCK MARKET WATCH -- Monday, 26 November 2012

[Demeter]

7. Australia introduces "kill switch" for computer share trading

http://uk.reuters.com/article/2012/11/20/australia-trading-idUKL4N09015L20121120

The Australian government introduced new market trading rules, including a "kill switch", on Tuesday to protect investors from volatility caused by controversial super-fast computer-driven trading. The government also launched further inquiries into high frequency trading and so-called dark pool trading, which allows shareholders to trade amongst themselves away from the main "lit" market without revealing their identity or display prices.

Electronic trading has come under global scrutiny since it was blamed for the "flash crash" in the Dow Jones Industrial Average in May 2010 when the index plunged 1,000 points, or 9 percent, and regained most of those losses in less than 20 minutes.

The Australian government's package of new market integrity rules includes the use of "kill switches" which could be used to immediately stop computer-generated, or algorithmic, trading in the event of sudden or untoward market movements. The rules, which were recommended by the Australian Securities and Investments Commmission, also require dark pools to offer a "meaningful price improvement" over the traditional "lit" market...

The U.S. Securities and Exchange Commission is mulling the effectiveness of "kill switches" as part of a broad review of technology issues after a major glitch at Knight Capital on Aug. 1 that led to a $440 million trading loss that nearly bankrupted the firm....