The speed of quote and trade data dissemination has increased since the the flash crash, when it generally averaged about 10 milliseconds, or thousandths of a second, according to the SEC. During several minutes of high volatility on May 6, the price information was delayed by as much as 35 seconds, causing concern about data integrity among market participants, who may have reduced the liquidity they supply through bids and offers, the SEC and CFTC report said.
NYSE Euronext’s average latency or time to process public data for all securities listed on exchanges other than Nasdaq Stock Market was less than 1 millisecond in the fourth quarter, compared with less than 3 milliseconds two years earlier, according to a notice. Nasdaq OMX Group Inc.’s average latency for public quotes and trades in Nasdaq-listed stocks was less than 2 milliseconds in the fourth quarter, the notice said. Quotes were processed in less than 4.5 milliseconds and trades in less than 6 milliseconds two years earlier.
The SEC has also revised the marketwide circuit breakers that halt all trading, created in the aftermath of the October 1987 crash, because they weren’t triggered during the May 2010 rout. The alterations will make the curbs “more meaningful and effective in today’s high-speed electronic securities markets,” the agency said when it approved the changes last year.
All U.S. securities trading will halt for 15 minutes when the S&P 500 falls 7% or 13% before 3:25 p.m. The lowest trigger was previously a 10% drop in the Dow average. The proposal also shortens the length of most halts and modifies the times when the circuit breaker can be triggered. A plunge of 20% will cause all trading to stop for the day. An industry-wide halt was triggered once, on Oct. 27, 1997.
The revised curbs are in effect for equity-index futures on the Chicago Mercantile Exchange and Chicago Board of Trade to ensure that prices in the related derivatives markets remain linked to stocks, Michael Shore, a spokesman for CME Group Inc., said in an e-mail. They will also apply to Russell equity futures traded on Intercontinental Exchange Inc., the company said in a notice on March 28.
CME and the Securities Industry and Financial Markets Association urged the SEC to allow marketwide curbs to be triggered if a sufficient number of individual stocks are halted since that may affect the calculation of indexes. The SEC said market participants could submit comments about this issue while the programs are being tested.
How curbs for individual securities will work in conjunction with those that halt all futures and securities trading is “poorly understood,” CME told regulators last year.