Are equity markets vulnerable to a sudden collapse if the traders who account for about half of the volume have no regulatory obligations to stabilize prices? After the “Flash Crash” of May 6, 2010, policymakers have resoundingly answered this question in the affirmative. During the worst of the crash, some of the so-called high-frequency trading firms that dominate equity markets stopped trading and prices collapsed, momentarily wiping out almost $1 trillion in market value. In response, the U.S. Securities and Exchange Commission is considering whether high-frequency trading firms should be required to act as the traders of last resort. This Note argues that the regulation under consideration would likely result in higher transaction costs without ensuring market liquidity or stability. This Note proposes instead that the largest high-frequency traders be subject to heightened regulatory oversight to ensure fair dealing.
Edgar Ortega Barrales,
Lessons from the Flash Crash for the Regulation of High-Frequency Traders,
17 Fordham J. Corp. & Fin. L. 1195
Available at: https://ir.lawnet.fordham.edu/jcfl/vol17/iss4/8
Agency Commons, Antitrust and Trade Regulation Commons, Banking and Finance Law Commons, Business Intelligence Commons, Corporate Finance Commons, Finance and Financial Management Commons, Legislation Commons, Other Business Commons, Portfolio and Security Analysis Commons, Securities Law Commons, Technology and Innovation Commons