Little change seen after May 6 "flash crash": panel

NEW YORK (Reuters) - Don't expect much change to the structure of U.S. equity markets a year from now, even after the "flash crash" of a month ago exposed flaws in the system, a panel of experts at a roundtable said on Tuesday.

The Securities and Exchange Commission and the Commodity Futures Trading Commission are still trying to determine the causes of the sudden plunge and dramatic recovery of security prices on May 6.

The SEC last week approved a pilot program through December that will require exchanges and security regulator Finra to pause trading in a stock for five minutes if its price moves 10 percent the prior five minutes, but little else has been done.

"I don't think we're going to see any change in the market structure," said Sang Lee, a managing partner at Aite Group in Boston. "Even today, the SEC, the politicians, everyone in the markets have talked to death many different issues, and I haven't seen anything significant happen yet," he said.

SEC staff also is working with the markets to consider recalibrating circuit breakers currently in place across all equity trading venues and the futures markets. None of these circuit breakers were triggered on May 6.

The SEC and CFTC created a joint committee to address regulatory issues immediately after the crash and then organized a roundtable in Washington among industry experts, investors and exchange officials to discuss the May 6 events.

In fact, the SEC has been examining market structure ever since the FBI's arrest last summer of a former Goldman Sachs' computer programer and news of the profits in high-frequency trading put algorithmic trading on the public's radar.

"From a regulatory standpoint I think there will be trading halts in place, and the short-sale circuit breaker will be in place, but I don't think there will be any other regulatory changes in place," Robert Colby, a former deputy director in the SEC's division of trading and markets who now is counsel at Davis Polk & Wardwell.

Lee and Colby spoke at a panel discussion organized by Liquidnet, a trading venue that allows institutional investors to trade large blocks of shares anonymously.

James Angel, a Georgetown University finance professor who warned the SEC in a letter a week before May 6 that there is a risk that something will go extremely wrong with trades at high speed, said the markets will remain competitive and prices will fluctuate.

"The SEC will continue to respond politically to whatever is getting the most attention in the press, or whatever is generating the most complaints from Congress," Angel said.

The number of broker-dealers will likely fall as their cost structure rises, and the role of the buy-side trader will get more difficult, said Vlad Khandros, a market structure and government policy analyst at Liquidnet.

"The regulators will continue to talk about concerns related to the high frequency traders; I don't think they'll be severely impacted," Khandros said.

(Editing by Padraic Cassidy)