Brokers who allowed high- frequency traders to have access to the markets without undertaking proper checks on them face potential fines as part of a clampdown following the “flash crash”, the head of a US watchdog said yesterday.
The Financial Industry Regulatory Association is undertaking a “sweep” of broker-dealers that offer market access to high-frequency traders to find out if they allowed these firms to run computerised trading programs – algorithms – without undertaking proper risk-management controls.
Regulators have yet to pinpoint the causes of the May 6 turmoil, when the US stock market plunged almost 1,000 points in minutes. A report due out next month by the Securities and Exchange Commission and the Commodity Futures Trading Commission might offer no definitive answers.