Photographer: Jin Lee/Bloomberg

SEC Chair White Concedes Reining in Flash Boys Is Difficult

  • White said in 2014 she wanted SEC to tackle disruptive trading
  • Regulator to publish work on issue and solicit public comments

Preventing flash traders from wreaking havoc is easier said than done.

It’s been more than two years since U.S. Securities and Exchange Commission Chair Mary Jo White said her agency wanted to rein in aggressive, high-frequency trading that could have a destabilizing impact on markets. She said Wednesday that crafting a rule is proving difficult, and that the agency’s next step would be publishing its work on the issue and seeking public comment. That means it could be years before a rule is in place, and the job will probably fall to White’s successor.

“One of the most difficult tasks in developing the right regulatory response to such potentially disruptive trading strategies is the need to avoid undue interference with practices that benefit investors and market efficiency,” White said in prepared remarks before a conference in Washington.

Disruptive Trades

High-speed traders have been blamed for everything from exacerbating the May 2010 flash crash for U.S. stocks to contributing to volatility during the European sovereign debt crisis. The SEC is trying to bring more transparency to the industry and to address criticism that it uses super-fast computers to gain unfair advantages over other traders. The need to tackle disruptive algorithmic trading gained additional urgency after Treasuries endured harrowing price swings in October 2014.

In a June 2014 speech, White said addressing aggressive short-term trading during periods of market vulnerability was an “area of particular focus.” She said she had directed SEC staff to develop a recommendation for a rule that would be carefully tailored to apply to algorithmic traders.

White said Wednesday there was no higher market structure priority for her than ensuring the agency considers a final plan before the end of the year for a massive repository that would track stock and options trading from exchanges and broker-dealers on a daily basis.

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