Joint CFTC-SEC advisory panel examines May 6

Members of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) met on Nov. 5 to examine a number of recent regulatory actions taken at each commission. Among the topics discussed, the contents of the May 6 “flash crash” report released on Sept. 30 were presented and commissioners were able to ask questions of the sub-committees. Below is the opening statement of CFTC Chairman Gary Gensler.

“Good morning. I am pleased to join Chairman Schapiro in welcoming the members of the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues to our fourth public meeting. I would like to thank Chairman Schapiro, her fellow Commissioners and the staff of the SEC for all they’re doing on the review of the unusual market events that took place on May 6, 2010, as well as our strong collaboration with regard to the Dodd-Frank Act.

I also would like to thank the staff of the CFTC for all of their hard work planning this meeting, reviewing the circumstances surrounding May 6 and releasing their thorough report on the contributing factors.

I also want to recognize and thank my fellow CFTC Commissioners, Mike Dunn, Jill Sommers, Bart Chilton and Scott O’Malia.

Since the Joint Advisory Committee last met, CFTC and SEC staff released a through supplemental report on the events of May 6. As outlined in the joint staff report released last month, there were three chapters of those events:

· Very fragile and uncertain markets due in part to the unsettling news concerning the European debt crisis;

· A liquidity crisis in the E-Mini S&P 500 futures contracts (E-Mini) and related index securities; and

· A liquidity crisis in individual securities.

Today’s meeting is primarily for the Committee to hear of the work of its two subcommittees and have an opportunity as a group to have an open discussion about May 6 and their thoughts on what changes should be made to ensure the markets work best for the investing and hedging public.

Before we hear from the subcommittees, we will receive a brief update from the staff, not only on the supplemental report, but also on some recent rule proposals of each of the Commissions.

Some of the ideas that I look forward to hearing about from this expert panel include:

· Foremost, I’m interested in what the Committee’s views are on how we protect market integrity in light of both the events of May 6 and the rapidly changing technology in the financial markets.

· More specifically, what, if any, additional risk protections should we consider with regard to the use of algorithmic and high-frequency trading?

· Should we require exchanges and executing brokers to update risk mechanisms and rules for market pauses? If so, how? What thoughts does the Committee have on cross-market linkages either with regard to circuit breakers or any other protections?

· Lastly, what are the Committee’s views on the variety of recent initiatives taken by our two agencies, including the CFTC’s advanced notice of proposed rulemaking on disruptive trading practices and the pilot program in the securities markets with respect to market pauses?

Today’s discussion should be open and candid. The May 6 market events created significant uncertainty in the markets and had significant implications for the investing public and American businesses. This Committee’s mission is to provide recommendations that the CFTC and SEC can implement to improve market integrity and market structures.

I again thank Chairman Schapiro and the SEC, my fellow CFTC Commissioners and staff from both agencies for their hard work on this issue.”

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