The major exchanges, in the wake of trading snafus in recent weeks, vowed to work together to craft and synchronize policies targeting error trades.Executives from NYSE Euronext, Nasdaq OMX, BATS Trading and soon-to-be exchange Direct Edge told trading executives at the Security Traders Association’s annual convention last week that they would work collectively to shape rules covering so-called “clearly erroneous trades” so that they were clear and consistent.Behind the decisions are complaints by broker-dealers and the STA over a lack of uniformity in exchange policies covering error trades and a need for exchanges to act as one National Market System on the issue.Joseph Cangemi, an STA official and BNY ConvergEx executive, pleaded with the exchange officials to work together to craft a solution. “The STA and the brokers sitting in this crowd urge you to work actively together to come up with a coordinated policy that makes it very clear for the participants what to expect in situations that fall out of place, that are not the norm. We’ve yet to see the norm established.”Brokers’ complaints follow a particularly bad day on Sept. 19, when tens of thousands of trades were pulled from the tape because they were considered erroneous.“We will collectively work together to make it better,” Joe Mecane, an NYSE Euronext executive vice president and chief administrative officer of U.S. Markets, told the crowd. “And we have been working collectively at the exchange level to try to sync up our erroneous policies so at least there’s a common application.”Nasdaq OMX senior vice president Brian Hyndman echoed Mecane. “We are trying to take a leadership role here,” he said. “We have formed a subcommittee of our quality of markets committee. We are talking to various exchanges to make sure we are on the same page. For the most part, we are, but we would like for everybody to have the same role, the same kind of filings, the same parameters and one transparent goal.”Hyndman added uniformity was necessary so that trade breaks happen in minutes, not hours.Both Hyndman and Mecane also noted that the solution lies with brokers, as well. Hyndman said brokers need to make sure they are not entering clearly erroneous trades into the system. He noted the number of clearly erroneous filings had gone up 30 percent year-over-year this year and that there were features and functionality offered by the exchanges that, if used by brokers, would reduce error trades.Bill O’Brien, chief executive of Direct Edge, noted that the Securities and Exchange Commission has indicated that the exchanges should solve the problem on their own. But, he fears, “outside forces will dictate solutions if the industry doesn’t.”
