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Tim Quast
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We're All HFTs Now

In this guest commentary, author Tim Quast looks back at the history of HFT and how the market has evolved to where many firms now fit the definition of high-frequency trader.

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January 3, 2011

Circuit Breakers of '87 to Tighten

By Peter Chapman

The marketwide circuit breakers in place since the 1987 crash may be getting an updating. "We are assessing whether various aspects of the broad market circuit breakers need to be modified or updated in light of today's market structure," Securities and Exchange Commission chairman Mary Schapiro testified at a U.S. Senate hearing last month.

A change is due, said David Shillman, an associate director in the SEC's division of trading and markets, because the market has become "faster and more electronic."

The official told the crowd at the ICI conference that the 23-year-old circuit breakers had almost never been triggered and that a change would involve "tightening the bands with a shorter duration." Today, the circuit breakers halt trading for at least 30 minutes whenever the Dow Jones Industrial Average falls by at least 10 percent.

The comments by the SEC officials follow the exchanges' installation of circuit breakers on individual stocks after May's "flash crash." These halt trading for five minutes if a stock moves by 10 percent or more.

 

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